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Friday, December 3, 2021

Barclays Raises Oil Price Forecast for 2022 on Faster Reduction of Inventories

Barclays raised its 2022 oil price forecast on Tuesday as it expects faster-than-expected inventory reductions and a cautious supply response to offset modest surplus next year.

The bank raised its 2022 average price forecast by $ 3 to $ 80 and $ 77 per barrel for Brent and West Texas Intermediate (WTI), respectively.

Oil prices fell on Tuesday amid speculation that the United States, Japan and India would free up crude oil reserves to tame prices, despite the threat of falling demand as COVID-19 cases erupt in Europe.

Barclays expects the smaller deficit in Q4-21 to turn into a surplus slightly earlier in Q1-22, compared to the previous Q2-22 period, but believes that the lower starting point for potential inventory build-up in the next year should be more than compensate for it.

“We believe that strategic oil reserves are not a sustainable source of supply, and the effect of such market intervention will only be temporary,” the bank said in a note.

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The United States is expected to announce a crude oil loan from its emergency reserves on Tuesday in an effort to lower energy prices, a Biden administration source familiar with the situation said.

Barclays said the persistent surge in COVID-19 poses significant risks to its outlook as it could impact demand, even though OPEC + is likely to slow or even pause its ongoing reduction in supply constraints in response to a significant slowdown in demand. …

The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC +, agreed earlier this month to stick to plans to increase oil production by 400,000 barrels per day from December.

Nakul Iyer

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