Barclays increased its oil price forecasts by $7 to $8 a barrel on Friday, saying the recently announced releases from Strategic Petroleum Reserves (SPRs) cannot be a sustainable source of supplies and will not have a lasting effect on prices.
Oil prices have fallen about 16% over the past two weeks as planned releases of 240 million barrels by consuming nations from emergency stocks offset some concerns about reduced supplies from Russia due to Western sanctions.
“Unless market expectations for underlying demand and supply change materially, an SPR release would likely be a headwind for prices at the front end of the curve and a tailwind further out the curve,” Barclays said in a note.
The bank forecast Brent crude prices at $100 per barrel for 2022 and U.S. West Texas Intermediate (WTI) crude at $96 per barrel.
“We remain constructive on oil prices with respect to the consensus but turn neutral with respect to the curve, as there is likely to be surplus in H2 22 and 2023, assuming no material disruption in Russian supplies beyond Q2 22,” the British bank said.
Oil markets have been focused on supply concerns following Russia’s invasion of Ukraine, but growing headwinds to demand are getting increasingly hard to ignore, the bank noted.
Barclays cut its 2022 demand growth forecast by 550,000 barrels per day (bpd), citing the implications of a slowdown in Russia, COVID-related mobility restrictions in China and higher food and energy costs on consumer spending.
Without any significant disruption in Russian supplies beyond the second quarter, the path of least resistance for oil prices is lower, Barclays said.
Although a 1 million-2 million bpd of disruption that lasts through the end of the year, would imply $10-$15 per barrel upside to 2022 price forecasts, Barclays said.