Oil prices will remain bullish through the end of February
That’s what Rystad Energy’s senior oil markets analyst Louise Dickson said in a statement sent to Rigzone on Tuesday, adding that “bearish blips” are expected throughout the year as investors cash out and move into the strengthening U.S. equities market.
In the statement, Dickson noted that the “chatter” around $100 oil remains hypothetical, but said such a bull scenario could materialize even on the backdrop of tighter monetary policy globally if the core producers from OPEC+ keep production below target levels and if Iranian crude remains off the market.
“Further supply disruptions resulting from activities in Libya or the UAE could also create the bullish conditions required for oil prices to cross the triple-digit threshold,” Dickson said in the statement.
Dickson highlighted, however, that a $100 price spike would eventually be corrected by marginal production, “primarily by U.S. shale producers and other production players in Canada, Brazil, Norway and Guyana”.
Looking at upside price risk, Dickson outlined that this risk could escalate due to further attacks on UAE oil infrastructure objects, Libya’s still unresolved election outcome, outages in Ecuador, unexpected offshore maintenance due to weather-related events, or a frigid air arriving in Texas for the second time this winter season and hampering production.
Downside risk to the current oil prices is mainly tied to oil demand consumption fallout from the Omicron variant or other future variants that would necessitate tighter restrictions and negatively impact refined products such as jet fuel, diesel and gasoline, Dickson noted.
Dickson added, however, that global concerns over Omicron appear to be waning with governments removing restrictions and lockdowns, “which is positive news for refined products demand barring any new variant emergence”.
Global confirmed weekly Covid cases hit an all time high of 22.7 million in the week commencing January 17, according to World Health Organization (WHO) data, which showed that 54,363 deaths occurred during the same period. Before WHO announced on November 26 that it had designated B.1.1.529 as a variant of concern named Omicron, the global confirmed weekly Covid case record was seen in the week commencing April 26, 2021, with 5.69 million cases, WHO figures show. Deaths during this period stood at 95,582.
At the time of writing, the price of Brent oil stood at $89.22 per barrel.