BofA sees oil demand recovering, hikes crude forecasts

(Reuters) - Bank of America (BofA) Global Research has lifted its oil price forecast for this year and next as demand recovers from coronavirus-linked shutdowns, the OPEC+ output cut deal curtails supply, and producers slash capital expenditure.

FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus Mordant/File Photo

The bank now sees Brent crude oil averaging $43.70 per barrel in 2020, up from a previous estimate of $37. In 2021 and 2022, the bank forecasts average prices of $50 and $55 a barrel respectively.

For WTI crude, BofA expects an average price of $39.70 per barrel this year, compared with $32 previously, and average prices of $47 in 2021 and $50 in 2022.

“As we head into next year, we believe transportation demand could recover at a faster rate than we initially anticipated,” the bank said in a note dated Friday.

“We also think that OPEC+ will likely hold back larger supply volumes than we anticipated three months ago.”

Brent futures were trading around $42.17 a barrel on Monday, and U.S. crude at $39.54. [O/R]

“A pattern of falling inventories across most regions should emerge as we move into H2 2020. As a result, we expect the full Brent crude oil curve to return into backwardation by year-end,” it said, referring to a market structure which usually points to supplies tightening up.

It expects the oil market to register a deficit of 2.5 million barrels per day (bpd) in the second half of 2020 and 1.7 million bpd in 2021.

The bank said its bullish view could be challenged if production picked up with the rise in prices, or if there was a significant second wave of COVID-19 infections.

“Yet a synchronous global lockdown is not as likely, even if local stay-at-home orders re-appear,” the analysts at the bank wrote.

Reporting by Shreyansi Singh and Swati Verma in Bengaluru; Editing by Kirsten Donovan