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In the latest client note published on Tuesday, the UBS analysts painted a rosier picture for oil prices next year, in the wake of a pick-up in oil demand, as the coronavirus-hit major economies ease lockdown and travel restrictions, per Reuters.

Key quotes

“We therefore expect the oil market to be balanced in third quarter and undersupplied in fourth quarter, and Brent to recover to $43 per barrel by end-2020 and to $55 per barrel by mid-2021.

We still expect oil demand to contract strongly this quarter, though not as much as we did before; we now estimate minus 15 million barrels per day (mbpd) year on year for 2Q, versus minus 20 mbpd previously.

Global oil supply to contract by nearly 6 mbpd year on year in the second quarter, citing forced production shut-ins in North and South America.

Oil demand will likely continue recovering in the second half of this year, adding that consumer changes due to the virus may prevent a quick recovery to pre-crisis demand levels.

On the supply side, with the staggered production cuts winding down, the second half of 2020 will likely start with OPEC ramping up production by 2 mbpd.

Non-OPEC oil production, however, is likely get hit hard by low prices, causing production to be shut in as well in 2H20.

End-of-quarter price forecasts for Brent are $32 per barrel for 3Q20 and $43, $50 and $55 a barrel for the following three quarters.”