BAKU, Azerbaijan, Aug.11
By Leman Zeynalova - Trend:
As the global oil market shifts to builds in 2H22, WTI prices are expected to sink below $70/bbl in 3Q22 and below $60/bbl in 4Q22, Trend reports with reference to the US-based JP Morgan Bank.
“Furthermore, the risk to that 2H22 outlook is skewed to the downside. With global oil inventories building at more than 2 mbd, WTI could find itself in a steeper contango than we expect, placing immense pressure on the front of the curve. If producers were to share our view of 2022 balances and pricing note-for-note, they might try to thread the needle and backload hedges in 2H22. It is a longer road to a $70/bbl 2H22 WTI swap but, with prompt WTI likely peaking at $80/bbl in December and above $75/bbl through 1Q22, we think they will get a chance to do just that,” said the Bank.
Assuming the January WTI contract trades $10 higher by the end of 2021, as we expect, producers could have the opportunity to hedge full year 2022 production above $70/bbl in 4Q21, said the JP Morgan Bank. “Because we expect a roughly balanced global oil market to keep WTI prices above $70 through May 2022, producers who take advantage of an opportunity to sell at $70/bbl may end up with continued, albeit much smaller, losses on derivatives in 1H22. However, we also think they could find those same hedges substantially in the money in the second half of the year.”
---
Follow the author on Twitter: @Lyaman_Zeyn