SINGAPORE (July 13): With signs that oil supply and demand are moving into balance as the world emerges from the COVID-19 pandemic, Pictet Wealth Management has revised upward its year-end price target for Brent oil.
This comes ahead of an expected OPEC+ meeting this week, at which the group may announce plans to start reducing historic production cuts.
Jean-Pierre Durante, Head of Applied Research at Pictet, said the year-end target will now be at US$40 ($55.60) a barrel, up from its previous US$18 ($25.02) per barrel.
He noted this was due to a decline in new cases of the virus, notably in European countries. This has, in turn, sparked a lifting of lockdown measures and a recovery in oil prices.
Durante added, “A rapid recovery in mobility and changes in travel habits, such as a preference for individual means of transport over mass transit means higher demand for refined products despite ongoing weakness in air traffic.”
He cited the fact that in early June, the Brent price has hovered in a range between US$37 and US$44, confirming that a form of temporary equilibrium has been reached.
Durante said a higher long-term fundamental equilibrium price combined with encouraging signs of economic recovery and restraints on supply point to a higher oil price, and worries about the recent increase in COVID-19 cases in parts of Europe and the US have not significantly weakened the oil price.
Philip Futures revealed the crude oil market rose on Friday after the International Energy Agency (IEA) raised its global 2020 crude demand estimate to 92.1 million barrels per day (bpd), up 400,000 bpd from a prior estimate.
However, the IEA warned that a flare-up of the coronavirus, which is raging across several US states and re-emerging in Asia, is "casting a shadow over the outlook."
