Oil consumption has started to recover as economies reopen while OPEC+ production cuts are doing their part in the rebalancing of supply and demand. Nonetheless, full commitment to cuts is yet to be made. All in all, strategists at Danske Bank see Brent trading at $40 the rest of the year while forecast the commodity to rise next year reaching $60 by end-2021.
Key quotes
“The return to more normal market conditions is a long uphill ride. The significant inventory overhang is limiting a swift recovery in US shale production. Drilling activity here remains subdued. Even when there comes room to increase output, it remains to be seen how easy it will be to turn on wells that have been shut-in.”
“OPEC+ stands committed on output cuts now, although compliance has yet to reach 100%. As the oil price recovers, the commitment may start to falter. On a medium to long-term horizon, low investment activity now may result in supply shortages.”
“The oil market should stay resilient, but short-term the rally might take a breather since high inventories have yet to be normalised and OPEC+ is still struggling with full compliance to output cuts.”
“We keep our forecasts for Brent and look for the black gold to average $40/bbl in Q3 and Q4, $45/bbl in Q1 and Q2 next year, $50/bbl in Q3 and $60/bbl in Q4.”
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