Bank of America (BofA) Global Research lifted its forecast for Brent crude oil prices for this year citing tighter supplies due to the Texas freeze and OPEC+ output curbs and unmatched global monetary stimulus, it said in a note dated Monday.
The bank now expects Brent crude oil to average $60 per barrel in 2021, up from a previous estimate of $50. BofA also forecasts West Texas Intermediate (WTI) crude prices to average $57 a barrel this year.
Brent prices could temporarily spike to $70 a barrel in the second quarter of the year, the bank’s analysts said in a note.
Brent crude was up 0.4% at $65.51 a barrel by 1313 GMT, and U.S. crude rose 0.5% to $62.00 a barrel.
Oil prices rose on Tuesday, helped by the likely easing of COVID-19 lockdowns globally, positive economic forecasts and lower output as U.S. supplies were slow to return after the deep freeze in Texas shut down crude production.
“The big Texas freeze in the past week should reduce global inventories by an additional 50 million barrels, further supporting (oil) prices,” BofA said.
The bank also said Saudi Arabia’s additional, voluntary oil output cuts in February and March and the Organization of the Petroleum Exporting Countries and allies (OPEC+) holding production steady were also supportive.
OPEC+’s supply deal that extends into the first quarter has removed an extra 180 million barrels from the market, creating more spare capacity, they said.
However, BofA noted the biggest short-term downside risk to oil prices may come from a new Iran deal, which could bring 2 million bpd into the market in short order.