The consensus is even OPEC's output relaxation won't be enough to replenish supplies: File Image/Pixabay
Schizophrenic investors who for the past month haven't been able to decide if demand recovery is doomed or assured due to Covid chose on Thursday to favour the latter, causing oil prices to rebound, and based partly on yet more analytical firms predicting demand will outstrip supply later this year.
Shortly after Morgan Stanley forecast that global benchmark Brent will trade in the mid to high-$70s per barrel for the remainder of 2021, Brent gained $1.56 to settle at $73.79 per barrel.
West Texas Intermediate added $1.61 to settle at $71.91 per barrel.
Phil Flynn, senior market analyst, Price Futures Group Inc.
The death of demand was greatly exaggerated
Morgan Stanley said that "In the end, the global GDP recovery will likely remain on track, inventory data continues to be encouraging, our balances show tightness in H2 and we expect OPEC to remain cohesive" - a reference to the Organization of the Petroleum Exporting Countries' recent agreement to gradually ease output restrictions in the months head.
Barclays on Thursday also said it foresees a faster-than-expected draw in global oil inventories to pre-pandemic levels, and it raised its 2021 oil price forecast by $3 to $5 to average $69 per barrel: "Notwithstanding the tail risks, supply-demand dynamics point to a slow grind higher in prices over the next few months."
The British bank suggested oil might skyrocket to $100 per barrel if OPEC+ is too slow in ramping up supplies.
Even Bloomberg, which with other news media has relentlessly sounded the alarm about demand destruction due to Covid variants, stated on Thursday, "Gasoline demand is essentially back to normal in many of the biggest oil-consuming countries, with road traffic data showing a similar trend; plus, over the past two weeks, Europe's air traffic came close to two-thirds of flights as the same period in 2019."
It fell upon Phil Flynn, senior market analyst at Price Futures Group Inc., to echo the sentiment of the analytical community, which was able to shrug off near-term fears about the effect of Covid variants and see the bigger picture: "The death of demand was greatly exaggerated," he said, adding, "Demand is not going away, so we're back looking at a very tight market."