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The ongoing vaccine roll out, reopening of economies and growing inflationary pressure has brightened the outlook for oil prices. What’s more, OPEC+ has started normalising its oil output, which will ease the upside potential for oil prices from the sound demand backdrop, strategists at Danske Bank brief.

Range bound in the second half of the year

“Vaccine roll out, albeit with some bumps on the road, reopening of economies, strong support from monetary and fiscal policy and a relatively weak dollar all creates a sound backdrop for global oil demand. World oil consumption remains somewhat below the pre-pandemic level, but we are confident consumption will fully recover over the coming 1-2 year.”  

“We expect OPEC+ to balance the normalisation of output with the ongoing recovery in demand. Drilling activity is slowly increasing in the US shale oil and has not led to higher production yet. Inventory levels still have some way to go before they are normalised. On a medium to long-term horizon, current low investment activity now may result in supply shortages.”

“We expect Brent to average $70bbl in Q3 and Q4 and $72.5bbl in 2022.”