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RHB Research: Brent crude to reach up to US$83 per barrel in 2022-2023

27/01/2022 04:13 PM

KUALA LUMPUR, Jan 27  -- RHB Research has increased its Brent crude oil forecasts to US$70 to US$83 per barrel for 2022-2023 from US$65 to US$69 per barrel previously, while keeping its long-term forecasts at US$60 per barrel.

The brokerage said the upward adjustment in price forecast for 2022 reflected a stronger-than-expected demand amidst the spread of the Omicron variant, a lower-than-expected supply pressure and risk premium amidst geopolitical uncertainties.

“Based on the available data, the crude oil demand increase should increase 4.2 million barrel per day (mbpd) in 2022.

“We expect oil prices to trend higher and average US$90 per barrel in the second quarter of 2022 due to elevated geopolitical tensions in the near term,” it added.

However, RHB Research said this would not result in massive supply damage in the longer term.

“As such, we still maintain a relatively lower price forecast at US$75-US$80 per barrel in the second half of 2022.

“This is premised on higher supply pressure from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) countries in accordance to their production schedule and a potential stronger comeback in the United States’ (US) production as the country’s rig count is still on the rise,” it added. 

RHB Research believed OPEC’s strategy was likely to stay intact, as the current production ramp-up schedule would allow the oil cartel and its allies to increase their output and capitalise on the higher oil prices.

“It may not be worthwhile to aggressively increase production for a higher market share at the expense of weaker oil prices, especially when the US production may not be seen as an immediate threat with its subdued numbers,” it added. 

Last week, oil prices had hit a seven-year high, with Brent crude hitting US$89 per barrel and West Texas Intermediate surpassing US$87 per barrel, largely driven by the drone attack in the United Arab Emirates as well as escalating tensions between Russia and the Ukraine. 

RHB Research said Russia’s potential invasion of Ukraine would drive commodity prices higher as Russia is the second-largest oil and dry natural gas producer in the world after the US, with a production of 10 mbpd, and it exports natural gas to Europe.

It warned that should the US decide to impose sanctions on Russia, it could trigger Russia to retaliate by restricting the export of energy resources. 

“European countries which are heavily dependent on oil and gas from Russia may have to pay hefty prices as this geopolitical premium further increases oil prices,” it added.




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