BAKU, Azerbaijan, March 3
By Leman Zeynalova – Trend:
Global benchmark Brent is forecast to average USD64.0/bbl and USD63.0/bbl in 2021 and 2022, respectively, up from USD58.0/bbl and USD56.0/bbl previously, Trend reports citing Fitch Solutions.
Brent rallied around 20 percent in February, reflecting tighter fundamentals and ebullient market sentiment. In part, the upward revision was made to reflect unanticipated strength in the year to date. It also captures our increasingly bullish expectations the post-pandemic recovery.
“In the near term, significant risks remain. In our view, prices have begun to run ahead of the fundamentals and leaving Brent vulnerable to any disappointments around global vaccinations or the strength of the economic recovery. Given that we are still in the early stages of the vaccine rollouts, that new variants of the coronavirus continue to take hold and that economic momentum has stumbled over recent months, financial markets have often looked overstretched,” reads the latest report released by Fitch Solutions.
Taken together, this suggests scope for a pullback in prices and renewed pockets of volatility, according to the company.
“In particular, our global team has flagged risks around a bursting of the millennial bubble, which could lead to contagion to riskier assets, such as oil. Nevertheless, assuming that vaccinations progress as planned, that economic activity and population mobility are allowed to broadly normalise and that governments continue to support that process, GDP growth and demand for oil should pick up pace over the coming quarters. This in turn would tighten the oil market and drive an accelerated drawdown in global inventories. In addition, we expect the reflation trade to take root as the key theme for markets in 2021, to the benefit of commodities,” reads the report.
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