Oil is assured to go up beyond $90 a barrel by the end of this year despite the record demand and the tightening supply, as per the UBS strategists.
“We still see scope for global oil prices to rally,”
a recent UBS note said to the investors.
“We now expect Brent to hit USD 95/bbl and the US WTI benchmark to rise to USD 91/bbl by end-December, up from the current USD 90/bbl and USD 85/bbl, respectively.”
Prices for Brent International stand just below $85 a barrel, which is about 3% off year to date highs reached previously in August. West Texas Intermediate is hanging above $80 a barrel.
The concerns over the economy of China, which is the second largest economy in the world, have currently pressured the crude oil futures. The data that was released by China’s National Bureau of Statistics on Tuesday further fueled the concerns of a slow recovery as Beijing has unexpectedly cut down the policy rates and withheld information on youth employment.
“Some investors remain skeptical that China’s latest stimulus efforts—a 15- basis-point cut to its one-year medium-term lending facility (MLF) and a 10bps cut to the short-term 7-day reverse repo rate—will be sufficient to revive demand,”
the UBS note mentioned.
” China is the world’s largest oil importer, the second-largest consumer, and the seventh-largest producer.”
However, the strategists at UBS are not expecting the price slide to persist despite the firming fundamentals. These include declining inventories and a tight supply as OPEC+ production has neared a two-year low.
“We expect global oil demand to hit a record high in August,”
the note added.
The analysts at Goldman Sachs have recently reconfirmed their prediction of Brent crude to be $93 a barrel and WTI to be $86 a barrel by December this year, emphasizing the fact that the market is less “pessimistic” over the global economy.