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Tight global supply is preventing a meaningful crude correction amid poor demand. WTI prices have again moved toward the daily high above $56 while Bart Melek, Head of Commodity Strategy at TD Securities, forecast the black gold at around $55 in the coming months.

Key quotes

“Economic data continues to show the negative impact of the second round of COVID-19 and vaccine program rollouts across the world have left much to be desired, which had many observers downgrading their demand estimates for 2021. But the crude oil market is looking past these developments, as it remains confident that OPEC+ will continue to stay committed to unwinding excess inventories and that US shale production under the Biden Administration regulatory system will have a hard time increasing supply.”

“There is also a risk that OPEC+ discipline and compliance may be peaking in Q1, as the higher price environment incentivizes nations to release the excess capacity into the market down the road. As such, there are risks that crude oil may migrate a few dollars lower over the relative near-term as demand returns into Q2 and OPEC+ responds with new supply.” 

“We project WTI to trade at around $55/bbl for most of 2021.”