Oil demand will return to pre-Covid levels by Q1 2022

Demand for crude oil will rebound to pre-pandemic levels by the first quarter of 2022, according to Wayne Gordon, executive director of commodities and forex at UBS Global Wealth Management.

Speaking to Bloomberg this week, Gordon said the outlook for oil was pretty bright although, he added, we may soon see more production once OPEC settles its internal disputes. The analyst noted the latest drop in US crude oil and fuel inventories reported yesterday, which signaled stronger demand.

Barring a new surge in Covid-19 infections as the latest variant of the coronavirus gains more and more attention, demand for oil could return to pre-pandemic levels early next year .

Gordon of UBS is far from alone in his bullish outlook on oil. Bankers are also optimistic. Goldman, for its part, stuck to its forecast of $ 80 a barrel for Brent in the third quarter, citing the rapid rebound in demand. JP Morgan agrees, seeing Brent surpass $ 80 in the current quarter.

Bank of America goes further: its analysts estimate that Brent crude could reach $ 100 a barrel but not this year. They see that price for the middle of 2022, which means BofA analysts expect supply to remain tight.

Meanwhile, global stocks are fall while the non-OPEC supply is not growing as fast as it would have under other circumstances. This is particularly true for the American offer. In previous cycles, US growers quickly started ramping up production, but now they’ve moved into a wait-and-see mode. This provides additional fuel for the prices.

Nothing is set in stone, however, and the price rally could be halted even with continued rising demand.

The rally “would only end if central banks started raising interest rates unexpectedly due to fear of inflation or in the event that OPEC increases production above demand – or they fail to accommodate additional Iranian barrels if the Persian Gulf OPEC member returns to the market, ”Tamas Varga, PVM Oil Associates analyst, told CNBC last week.

By Irina Slav for Oil Octobers

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Felix J. Dixon