Banking giant Barclays has slashed its price forecasts for both Brent and West Texas Intermediate (WTI) crude oil by $8 for both this year and next year, indicating that the world may avoid having to deal with escalating oil prices.
It justifies the change by stating that supplies of Russian oil have remained resilient and will likely contribute to a substantial surplus in the near term. The bank believes this will lead to WTI and Brent crude oil trading at an average of $99 and $103, respectively, for both 2022 and 2023.
These estimates are somewhat higher than current prices, which were around $87 and $92 at the time of writing. However, the bank said in a note that this may be timing related, with increasing concerns about an economic downturn coinciding with elevated levels of Russian supply ahead of sanctions from the European Union coming into effect later in the year. Barclays forecasts that these insurance and import restrictions will reduce Russia’s output of crude oil by 1.5 million barrels per day (bpd).
While US producers like ExxonMobil and Chevron, the maker of the Texaco Crater lubricant range, are unlikely to respond to a drop in prices, the bank believes this may increase the chances of OPEC+ intervening:
“We think the threshold for such intervention would be lower than in 2020 because of a potential exemption from supply cuts for Russia due to sanctions and the lack of price response from U.S. producers.”
The bank believes this limits the potential downside to its price forecasts.