Bank of America, which deals in Financial Services and Banking, anticipates improved demand because of the lifting of closures the coronavirus pandemic caused. On the other hand, the OPEC plus agreement on production cuts reduced the supply of oil. It will also increase the prices this year and the next.
The bank expects Brent crude to average $43.70 a barrel in 2020. That’s more than the previous $37. The Bank of America forecasts average oil prices for 2021 and 2022 at $50 and $55 per barrel.
The Bank of America expects West Texas Intermediate oil to average $39.70 a barrel this year, up from $32 previously. Analysts project the average US oil price for 2021 and 2022 to be at $47 and $50 per barrel.
The Bank of America said in a statement that, with the arrival of next year, the demand for transportation would increase faster than previously estimated.
The bank also assumes the OPEC coalition and its allies would lower their oil supply by more than expected three months ago.
The Bank of America expects the oil market to shrink by 2.5 million barrels per day in the second half of 2020. From 2021, they expect 1.7 million barrels per day.
The Bank of America said its optimistic predictions would be challenged if production increased. This could also happen if the second wave of the Coronavirus epidemic began.
In April, for the first time, crude oil prices turned negative. WTI dropped as low as minus $37 per barrel. Oil producers were paying buyers to take the commodity off their hands. This was over worries that storage capacity could run out in May. At the beginning of the year, the coronavirus outbreak and the lockdowns around the world hit the oil demand. The oil industry has been fighting with both plunging demand and in-fighting among producers about decreasing production.