Oil has staged an impressive recovery – although has been mostly range-bound over the last month, with ICE Brent struggling to break above $70. There are several factors that appear to be holding the market back for the moment, however, strategists at ING expect Brent Oil to hover around $70 through the second half of 2021.
The biggest downside risk is if oil demand does not recover quickly
“OPEC+ is set to increase output by 2.1MMbbls/d over the next three months. Iran has been increasing output for much of this year, despite US sanctions, and this is a trend which is likely to continue for the remainder of the year, regardless of whether we see a quick lifting of sanctions or not.”
“The latest COVID-19 wave across India is a big worry for the oil market, given it is the third-largest oil consumer in the world. Therefore there are concerns that if the situation deteriorates further, we may see a significant hit to global demand.”
“We continue to believe that prices will edge higher as we move through the year, and still expect that ICE Brent will average US$70/bbl over the 2H21. Despite rising OPEC+ output, and also accounting for larger Iranian supply, the market is still set to draw down inventories throughout the year.”
“During these uncertain times, the biggest downside risk for the market is if oil demand does not recover as quickly as many in the market are anticipating.”
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