Morgan Stanley downgraded its Brent price estimates for the first quarter of 2022 to $ 82.50 a barrel from $ 95 a barrel, as the market expects the Omicron variant to become a major problem for oil demand.
The market seems to be assessing the possibility that the new variant could lead to restrictions and a reduction in oil demand, amid expectations of oversupply, mainly from the planned release from strategic oil reserves that adds to OPEC + monthly production.
Oil rose almost 5% on Monday to $ 76 a barrel, after falling more than 10% on Friday, in the wake of the Omicron variant.
But the start of next year could bring surplus supply, with back-up capacity likely to erode by the end of 2022, as stocks fall further from already low levels.
OPEC + may not increase inventories by 400,000 barrels per day as it has neither the capacity to do so nor the incentive to oversupply in the market, the bank said.
He added that the market is expected to have a low supply in 2022, compared to what the International Energy Agency estimates.
“The rise in brent prices above recent highs again is likely to occur from mid-2022 onwards,” the bank said, raising estimates for the third quarter (for brent) to $ 90 in barrel from $ 85.
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