Swiss strategists at UBS expect oil to rebound to $125 in the coming months as fundamentals point to higher prices, spare capacity dwindles and inventories are at multi-year lows.
In a Thursday research note, UBS responded to Saudi comments that OPEC+ could cut production at any time, citing a “disconnect” between fundamentals and oil futures.
The bank also noted an impending disruption to oil markets when a European ban on imports of Russian oil by sea takes effect in December.
“The European Union intends to reduce its reliance on Russian imports of crude by sea by December 5 and refined products by February 5. This will likely cause disruption, as Russian oil imports to the EU amounted to 2.8 million bpd in July,” the research note said. , as reported by national news.
UBS strategists have said ending strategic oil reserve releases in OECD countries will eventually take more than a million barrels a day off the market starting in November.
This would lead to “tighter markets at the end of the year,” UBS wrote.
Comments regarding OPEC+’s potential to cut oil production came from the Saudi energy minister Prince Abdulaziz bin Salman earlier this week. Since then, oil prices have risen above $100 per barrel.
Ahead of the prince’s comments, oil prices were down as the market weighed the impact of the potential return of Iranian barrels if a relaunch of the 2015 nuclear deal was agreed. The market also considered slowing economic growth as a bearish weight.
Wednesday, reports have emerged that Iran had received responses from the United States regarding Tehran’s concerns about the final draft of the nuclear deal.
Waiting, Reuters quotes Oanda analyst Crain Erlam, who said the Saudi energy minister’s comments could make “the possibility of a return below $90 in the near term hard to come by unless a deal is reached.” on nuclear is concluded and that OPEC+’s appetite for cuts is tested”.
By Charles Kennedy for Oilprice.com
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