BAKU, Azerbaijan, March 2
By Leman Zeynalova – Trend:
The US JP Morgan Bank has slightly boosted its 2021 Brent oil price forecast by $3/bbl, while keeping our 4Q21 forecast unchanged at $68/bbl ($71/bbl December average), Trend reports.
“We also lift our 2022 average price forecast by $6 to $72/bbl, fully aligning our price forecast with our model-predicted values. Our price deck is now 2 percent above the futures curve for calendar year 2021 and 21 percent above calendar year 2022, with 2Q22 at a 27 percent premium to the futures curve. Having said that, prompt futures prices seem to be a bit high vs. fundamentals at the moment, likely driven by significant improvement in sentiment which is not captured in our model. After trading for the most part of 2020 below model-predicted levels, Brent oil price is currently running two quarters ahead and $4 above what fundamentals warrant.
This exuberance is evident in the price momentum signal, which remains in extreme territory, suggesting a risk of profit-taking or mean reversion signals being triggered. The acknowledgment of this froth drives our decision not to raise our 2021 price forecasts beyond the $3 implied by the faster inventory normalization. In other words we are calling time out on the rally for the time being,” reads a report released by the Bank.
On the supply side, OPEC+ discipline and Saudi Arabia’s decision to reduce output by 1 mbd through March were further amplified last week when US crude production fell 3.2 mbd amid an unprecedented polar blast.
“Using natural gas sample data, we now peg the disruption impact for February from a monthly average perspective at 1.3 mbd, with 770 kbd coming from lost crude and condensate production and another 530 kbd from a drop in NGL supply. From the demand perspective, the winter of 2021 stands out as one of the coldest in decades, upending energy markets and sending prices for electricity, fuel and vessels to record highs. According to Platts, extreme winter weather over January and February added 1.3 mbd and 0.8 mbd, respectively, to each month's oil consumption in the US, Europe and Japan alone, compared to year ago levels.”
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