Banks are continuing to bet that oil prices will rise as the market rebalances, underpinned by a supply cut by major producers and geopolitical turmoil, writes the WSJ’s Christopher Alessi.
For the fifth month in a row in February, financial institutions including Morgan Stanley and Citigroup raised their forecasts for crude’s fortunes.
Brent crude—the global benchmark—is now expected to average $62 a barrel this year, while West Texas Intermediate, the U.S. standard, should average $58 a barrel, according to a poll of 15 investment banks surveyed by The Wall Street Journal toward the end of this month. Both predictions are up roughly $1 from the January survey.
Central to that rebalancing has been the effort led by the Organization of the Petroleum Exporting Countries to limit crude production.
OPEC and 10 major producers outside the oil cartel, including Russia, have been holding back crude output by around 1.8 million barrels a day, or nearly 2% of global supply, since the start of 2017.
Prices have also been supported by geopolitical risks to supply in the Middle East.
Meanwhile, a stronger dollar after new Federal Reserve Chairman Jerome Powell signaled growing confidence in the U.S. economy weighed on oil prices on Wednesday.
Brent crude, the global benchmark, was down 0.27% at $66.45 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.19% at $62.89 a barrel.