BAKU, Azerbaijan, June 3
By Leman Zeynalova – Trend:
Oil prices have a scope to hold above $70/bbl in coming months, Trend reports with reference to Fitch Solutions.
‘There is no change in our Brent price forecasts this month and we maintain the view for the benchmark to average USD66/bbl in 2021 and USD64/bbl in 2022. Brent finally closed above the key resistance of USD70/bbl on June 1 after testing that level on several occasions during 2021. There is scope for prices to hold above this level in the coming months with a number of bullish triggers forming on the horizon, including strong demand signals from markets that appear to be re-emerging from Covid-19-related headwinds such as the US, Europe and China,” reads the latest report released by Fitch Solutions.
However, the company says there are still few downside risks, not least in the form of re-surging Covid-19 infections in parts of Asia.
“The number of daily new infections in India have more than halved from its peak in early-May, although significant risks remain, including the over-burdened domestic healthcare system and threats from emergence of other non-Covid infectious diseases such as the black fungus. Few other markets across South and South East Asia are also seeing relapses in infections, which have prompted governments to re-introduce strict containment measures including partial lockdowns,” said Fitch Solutions.
The report shows that there continues to be a fine balance between recovery optimism stemming from bullish sentiment arising out of the US, Europe and also China, versus demand worries from ex-China Asia emerging markets and parts of Latin America where infection rates continue to be elevated.
“The near-term market signals look to be mixed. The backwardation in Brent futures has narrowed at the very front end of the curve perhaps reflecting some near-term demand concerns, while speculative positioning, although still net long, has gotten slightly more bearish with the ratio of longs to shorts retreating to the lowest level since November 2020. Both signal continued optimism for higher prices but may also indicate lower conviction on a rise in oil prices.”
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