Global oil benchmark Brent could rebound and quickly rise past $90 per barrel on the back of a dovish pivot in the U.S. Federal Reserve’s monetary policy and a “successful” economic reopening by China, Bank of America (BofA) Global Research said.
Lately, oil prices have been steadily declining due to fears that a weakening global economy would slash fuel demand, setting prices on track for a second consecutive quarterly fall.
BofA forecasts Brent prices – trading at $75.95 a barrel on Monday morning – to average $100/bbl in 2023, driven also by a Chinese oil demand recovery on a post-COVID reopening and a drop in Russian supplies of about 1 million barrels per day (bpd) against the backdrop of European Union sanctions.
Moreover, a 2 million bpd OPEC+ output cut could be implemented in full to support prices, the bank said in a research note dated Dec. 9.
China last week announced the most sweeping changes to its resolute anti-COVID regime since the pandemic began three years ago, loosening rules that curbed the spread of the virus but sparked protests and hobbled the world’s second-largest economy.
However, “our oil demand and price projections for 2023 rely heavily on robust China and India demand growth, so any Asia reopening delays could affect our expected price trajectory,” said the bank, adding the path to a post-pandemic environment may be bumpy “given the low levels of immunity in China.”