LONDON: A rally in oil prices could stall as recession fears and Covid flare-ups in China slow demand and counter supply risks from sanctions on Russia and Opec+ output constraints, a Reuters poll showed yesterday.
A survey of 35 economists and analysts forecast Brent crude would average $105.75 a barrel in 2022, down from a forecast of $106.82 in June marking the first downward revision to the monthly poll since April. The global benchmark has averaged about $105 a barrel this year.
“The focus is slightly shifting away from supply disruptions towards crude demand destruction due to global recessionary fears,” said Edward Moya, senior analyst with OANDA.
The demand growth forecast for this year was also slashed to a range of 1.4 to 2.5 million barrels per day (bpd) from 2.3-5m bpd in the previous poll.
Rapid interest rate increases from major central banks coupled with travel restrictions in China, the world’s biggest crude importer, have soured the oil demand outlook, analysts said.
However, Western sanctions on Russian oil and Opec+ producers maintaining a leash on supply will put a floor under the prices, analysts noted.
“We still think the war in Ukraine and the tight market will drive prices in the short run, with the price of dated Brent trading in a range of $100-120/barrel for the rest of the year,” said Matthew Sherwood, commodities analyst at EIU.
US crude was seen averaging $101.28 a barrel in 2022, down from June’s $102.82 consensus.
The next meeting of the Organisation of the Petroleum Exporting Countries and allies including Russia, together called Opec+, is set for August 3 and will be closely watched as their current output pact expires in September and the US has stepped up calls for more production.
“Opec and the US in general would like to continue boosting production in the near term, but there are limits to the pace of increase and it is unlikely that production growth will be faster than market expectations,” said DBS Bank analyst Suvro Sarkar.