Oil prices have tanked more than 20% to trade under $100 a barrel, but Brent crude could see a reversal this year as supply in the global market remains tight, UBS said Wednesday.
Brent crude, the international benchmark, slipped during Wednesday’s session to $93.33 a barrel. The commodity has lost 25% since mid-June when it traded above $125 a barrel. The fall has also knocked Brent back to levels seen in late February, before Russia’s invasion of Ukraine propelled a price surge.
Concerns about potential recessions in the US and in China in the wake of weaker economic data from the world’s largest economies stoked the price slide alongside a rise in oil export volumes for Russia and OPEC, Mark Haefele, chief investment officer at UBS Global Wealth Management, said in the note. Progress in Iranian nuclear talks that could lead that country to pump more oil has also weighed on Brent prices. https://8e753032b2f72b373785f83e0f9c7cd3.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
“However, we continue to believe that the recent decline in oil prices does not fully account for constraints on global supply, and we expect the price to rebound to $125 a barrel by the end of the year,” Haefele said.
OPEC and its allies recently agreed to raise output by 100,000 barrels a day in September, one of the smallest increments in its history despite pressure from oil consumers, said UBS.
“Most OPEC+ members are already producing at around capacity, except for Saudi Arabia and the UAE. In our view, the actual production increase in September is likely to be just one-third of the agreed rise in volumes,” the investment bank said. It added that OPEC+ has said a lack of investments will impact the availability of adequate supply to meet growing demand beyond 2023.
Meanwhile, the output from OPEC+ is likely to be undermined by falling Russian production as European countries plan to cut nearly 3 million barrels per day of crude oil and oil product imports from Russia by the end of 2022. On Wednesday, the cartel’s new secretary general said that the organization should not be considered responsible for the massive energy price spikes this year, blaming instead chronic underinvestment across the industry.
From the Chin