By Will Horner
Crude oil prices will average just under $78 a barrel this year, as members of major producers struggle to hike supplies at the same pace as rebounding demand, according to a Wall Street Journal survey of analysts' forecasts.
Prices for Brent crude, the international oil benchmark, will stand at $77.76 a barrel this year, declining to $74.25 in 2023, according to the average of forecasts taken from 12 major banks.
The 2021 forecast is the highest average annual forecast record by the Wall Street Journal since January 2016.
Prices are expected to average just over $79 a barrel in the first and second quarters of 2022, before creeping lower to just over $75 a barrel by the first quarter of 2023.
Analysts say current conditions in energy markets appear to be the most bullish in years. Demand for oil is recovering from its pandemic-induced decline at a strong clip, while major producing nations have been slow to turn supply taps back on. Meanwhile, global efforts to transition to more environmentally friendly energy sources have constrained investment in new supply.
Members of the Organization of the Petroleum Exporting Countries and a group of allied producers led by Russia have pledged collective production hikes, but have so far failed to deliver. Many OPEC nations are struggling with aging energy infrastructure which has hampered supply increases.
Last month, OPEC and its allies increased their collective output by 250,000 barrels a day, just 60% of what it had pledged for the month, according to the International Energy Agency.
Geopolitical tensions in the Middle East and Eastern Europe have further lifted prices. The threat of war between Russia and Ukraine imperils Europe's access to Russian energy supplies, while recent attacks on the UAE by Yemen's Houthis have risked damaging the Gulf state's energy infrastructure.
Oil watchers are concerned that dwindling inventories and a lack of spare production capacity mean there is little to cushion the impact of a sudden shock to supply.
The situation has prompted some forecasters to suggest oil could rise back above $100 a barrel, for the first time since 2014. Morgan Stanley expects oil to average that level for the third and fourth quarters of the year while Bank of America expects oil to average $95 a barrel in the second quarter.
The survey suggests, however, that such forecasts remain outliers and most analysts expect price gains to be more modest.
Write to Will Horner at email@example.com
(END) Dow Jones Newswires