Oil supercycle25 Mar 2021 10:06
Banks stand firm on calls for oil ‘supercycle’ even as price drops
Brent has tumbled 15% from recent peak on rising concerns over demand
Banks including JPMorgan, Goldman Sachs and Barclays have in recent days reiterated their long-term bull case for oil or increased their forecasts for prices.
Banks calling for an oil “supercycle” have said the 15 per cent tumble in the price of crude in recent weeks marks a pause rather than the end of what they see as a sustained move higher.
International benchmark Brent crude has fallen from a 14-month high above $71 a barrel on March 8 to a low of $60.50 on Tuesday, when prices tumbled 6 per cent. Prices had rallied 84 per cent from November to the recent peak.
Traders were betting that demand would rebound sharply as Covid-19 vaccines rolled out around the world, but delays to inoculations and stricter lockdowns in Europe have hit short-term oil consumption, while growing inflation concerns unsettled wider financial markets. New hedge fund bets on rising oil prices have slowed sharply in recent weeks, according to exchange and regulatory data.
But banks including JPMorgan, Goldman Sachs and Barclays have in recent days either reiterated their long-term bull case for oil or even increased their forecasts for prices.
Analysts at Barclays said on Tuesday that they were raising their Brent forecast to an average of $66 a barrel in 2021 and $71 a barrel in 2022, arguing they still see demand rebounding in the second half of this year.
Christyan Malek at JPMorgan, who was one of the earliest proponents of the theory that the oil industry is heading into a new supercycle — or a prolonged period where demand starts to outstrip supply — said that while the “correction” in the price would not be welcomed by the industry, it would ultimately reinforce the longer-term rally.
“At the oil market level it’s the kind of medicine the industry needs as it keeps big producers cautious and further slows investment,”
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