Once the current round of COVID-19 concerns begins to settle, oil prices potentially could rise above $70 per barrel by the middle of this year, according to S&P Global Platts Analytics.
Dated Brent, the physical benchmark for crude oil, is currently in the low $60s, but Platts’ analysts believe that better fundamentals will start to emerge in May, triggering a tangible draw on inventories in the following months and pushing the price above $70 per barrel, which is arguably the “sweet spot” for many oil producers.
While the consumers of crude oil products may not be so happy to see oil prices rise, it may be necessary to ensure the world’s energy security in the medium and long term. Many oil companies – such as ExxonMobil, the maker of the Mobil lubricant range – drastically reduced their investment in new oil projects in response to the current pandemic, but this could be reversed if higher oil prices are sustained.
Toril Bosoni, the head of the oil markets division at the International Energy Agency, said to Platts recently in an interview:
“Sustained oil prices above $60/b could allow oil companies to respect the pledges that they made in their latest investor strategies to maintain capital discipline, return capital to investors, reducing their debt but at the same time increasing their investment.”
For the time being, the OPEC+ group is likely to raise production to fill the gap between supply and demand, enabling it to finally regain some of the market share it lost due to its production cuts.
