LONDON, Jan 12 (Reuters) - Oil prices that rallied 50% in
2021 will power further ahead this year, analysts predict,
saying a lack of production capacity and limited investment in
the sector could lift crude above $100 a barrel.
Though the Omicron coronavirus variant has pushed COVID-19
cases far above peaks hit last year, analysts say oil prices
will be supported by the reluctance of many governments to
restore the strict restrictions that hammered the global economy
when the pandemic took hold in 2020.
Brent crude futures traded above $84 on Wednesday,
hitting two-month highs.
"Assuming China doesn't suffer a sharp slowdown, that
Omicron actually becomes Omi-gone, and with OPEC+s ability to
raise production clearly limited, I see no reason why Brent
crude cannot move towards $100 in Q1, possibly sooner," said
Jeffrey Halley, senior market analyst at OANDA.
The Organization of the Petroleum Exporting Countries (OPEC)
and its allies, a group known as OPEC+, are gradually relaxing
the output cuts implemented when demand collapsed in 2020.
However, many smaller producers can't raise supply and
others have been wary of pumping too much oil in case of renewed
"We dont want to see $100 a barrel. The world is not ready
for that," Omani Oil Minister Mohammed Al Rumhi was quoted as
saying by Bloomberg on Tuesday.
Morgan Stanley predicts that Brent crude will hit $90 a
barrel in the third quarter of this year.
With the prospect of depleting crude inventories and low
spare capacity by the second half of 2022, and limited
investments in the oil and gas sector, the market will have
little margin of safety, the bank said.
Standard Chartered, meanwhile, has raised its 2022 Brent
forecast by $8 to $75 a barrel and its 2023 Brent forecast by
$17 to $77.
J.P. Morgan analysts also expects oil prices to rise as
high as $90 by the end of the year.
Current demand strength is acvting as a near-term tailwind,
having proved largely immune to surging coronavirus infections,
the bank said.
(Reporting by Bozorgmehr Sharafedin
Editing by David Goodman)