Brent Oil to trade above $70 by year-end – Deutsche bank

Oil rally in hands of OPEC as further drawdown in oil inventory suggests oil strength into year-end. Strategists at Deutsche Bank also forecast substantial spare capacity through 2022.

See: Brent Oil to ease back towards $70 by end-2021 after peaking at $80 – CE

Key quotes 

“We remain constructive and expect prices to firm further, to above Brent $70/bbl by the end of the year. This view assumes that OPEC+ supply discipline remains intact in the face of still depressed demand in the US (down 6% YoY) and Europe (down 20%).” 

“The recent strength in crude oil prices is principally a result of the slower-than-planned rollback of OPEC+ supply discipline, along with additional unilateral cuts by Saudi Arabia for the Feb-Apr period. We think the risk of a disorderly OPEC+ breakup is small, as Russian cooperation is elicited through exceptions allowing only Russia and Kazakhstan to reintroduce supply.” 

“New US capital spending should remain depressed as well at least in 2021 if not 2022, as oil industry consolidation continues. While demand should be picking up with stronger growth in the US and Europe this year, supply discipline will have potential to ease as well.”