Bold prediction

Bank of America expects oil prices to recover to $60 a barrel for Brent crude in the first half of next year thanks to shrinking global inventories and prices improving faster than previously expected.

“Back in June, we upped our oil price forecasts by $5 per barrel (/bbl) and argued that Brent would average $43/bbl in 2020 and $50/bbl in 2021,” Bank of America’s analysts said as quoted by Trade Arabia.

However, since then, oil futures have been rising faster than expected even though spot prices remained range-bound, the bank noted. Because of this and because it expects an oil market deficit of 4.9 million bpd for the second half of this year and another of 1.7 million bpd next year, BofA expects prices to shoot up.

The bank’s analysts noted the slump in drilling rigs, notably in the U.S. shale patch, and the OPEC+ oil production cuts as some of the main factors that would push the oil market into a deficit and prop up prices.

I have doubts.  First, I doubt we solve covid until the middle of next year, and oil prices will stay below 45 until then.  The dollar will likely remain stable or only slightly down.

We are locked into austerity, frankly.  Any massive spending attempt will turn into a deflationary tax via the Fed.  We still suffer Post Nixon Shock Syndrome, on both sides of the aisle.  And we have ongoing middle east wars, especially North Africa and Iraq.  Finally, industrial economies will not restart until the covid picture is straightened out.