Brent Crude oil prices are set to stay in the near term at the upper end of the current trading range between $60 and $70 per barrel as the market remains tight during the peak summer demand season, according to investment bank UBS.
“We expect global oil demand to peak for the year in August and modestly decline over the coming months,” Giovanni Staunovo, an analyst at UBS, wrote in a Friday note carried by Reuters.
Oil prices are expected to moderately drop toward the lower end of the $60-$70 a barrel range later this year as supply continues to rise while demand will weaken in the fourth quarter.
“With supply in South America still expected to increase a bit more, we see the oil market better supplied over the months ahead,” UBS’s Staunovo said.
Early on Friday, oil prices were set for weekly rise, with Brent trading at above $67 per barrel and WTI, the U.S. benchmark, at above $63 a barrel.
Global crude oil exports continue to hold strong and above the latest ten-year seasonal average, energy trade flow analysts Vortexa said this week.
Demand, however, is also holding strong this summer, absorbing an increase in South American supply led by Brazil and Guyana, and production hikes in the Middle East as OPEC+ continues to ease output cuts.
“Despite fears that the swift unwinding of production cuts from the eight core OPEC+ members, and subsequent increased exports mainly from Saudi Arabia and the UAE could push crude markets into oversupply, this has not concretely materialised as of yet,” Mark Toth, an analyst at Vortexa, wrote this week in an analysis on global crude shipments.
But analysts have started to notice narrowing backwardation in the market—a signal that traders believe supply would be plentiful as soon as peak summer travel season ends.
By Tsvetana Paraskova for Oilprice.com
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