Bank of America BofA Securities commodity strategist Francisco Blanch sees upside pressure on the oil price building, potentially leading to $100 crude sooner rather than later,
“As other energy prices like natural gas and coal keep pushing higher, upside risks to the oil market have started to build. For starters, there is an estimated 1.8mn b/d of available gas to oil switching at power plants capacity across Europe and Asia, even if only a fraction of this capacity is likely to be utilized … Further supporting oil prices, global demand is coming back and OECD oil inventories just dropped to the 10 year average … For Emerging Markets, consumption is coming back with a vengeance led by China and India … We continue to project that oil prices will remain range-bound in 2H21 and maintain our average Brent crude oil forecast of $70/bbl for this period (Exhibit 40), although we now target Brent to be at $75/bbl by year end … However, weather is quickly becoming the most important driver of energy markets. If the winter turns out to be much colder than normal, global oil demand could surge by 1 to 2mn b/d. Under this scenario, the oil market deficit this winter could easily exceed 2mn b/d and our $100/bbl oil target for the middle of next year could quickly be rolled forward six months.”