Rising geopolitical tension and demand send oil price outlook soaring

A sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. Picture taken November 22, 2019. REUTERS/Angus Mordant
  • Oil demand seen growing by 3-5 million bpd in 2022
  • OPEC+ likely to proceed with raising monthly output- analysts
  • For a table of crude price forecasts, click

Jan 31 (Reuters) - Oil prices will build on a strong start to the year with geopolitical risks to supply complementing a strong demand rebound as fears over the impact of the Omicron coronavirus variant fade, a Reuters poll showed on Monday.

A survey of 43 economists and analysts forecast Brent crude would average $79.16 a barrel this year, the highest projection for 2022 thus far and a notable increase from December's $73.57 consensus.

U.S. crude was forecast to average $76.23 in 2022, versus the $71.38 forecast last month.

"Given how tight markets are, oil certainly can rally above $100, particularly if OPEC+ supply increases continue to lag behind their target, U.S. producers fail to respond or if the Ukraine-Russia crisis worsens," the Economist Intelligence Unit said.

Demand was seen growing by 3-5 million barrels per day in 2022, with analysts seeing a muted impact from the current COVID-19 surge.

Prices have scaled their highest in more than seven years

Brent crude futures topped $90 a barrel for the first time since 2014 last week on concerns over the likely supply hit from a standoff between the West and Russia, one of the top oil producers, over Ukraine. read more

Threats to the UAE from Yemen's Houthi movement also exacerbated supply concerns.

Oil could gain further if Russia were to invade Ukraine, and western sanctions could impact energy exports, said IHS Markit analyst Marshall Steeves.

Goldman Sachs and Morgan Stanley recently forecast oil prices above $100 this year citing the lower-than-expected COVID-19 hit and supply disruptions.

But Julius Baer analyst Norbert Rücker said that while current market nervousness could cause near-term price spikes, "supplies are largely artificially not structurally tight".

Most analysts concurred that the Organization of the Petroleum Exporting Countries and allies, or OPEC+, is likely to proceed with its plan to raise monthly output by 400,000 barrels per day despite some members struggling with capacity constraints. read more

Meanwhile, planned releases from Strategic Petroleum Reserves led by the U.S. may have only minimal impact on the market, they added.

Analysts raise 2022 oil price forecasts
Reporting by Kavya Guduru in Bengaluru; editing by Arpan Varghese, Kirsten Donovan

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