The 15% tumble in the Crude oil price in the past weeks marks a pause rather than the end of a sustained move higher. The International benchmark Brent Crude has fallen from a 14-month high above $71 per barrel on March 8th to a low on Tuesday of $60.50. This was when the prices tumbled down to 6%. From November to the recent peak, prices had rallied 84%.
Although, banks like JP Morgan, Goldman Sachs, and Barclays in recent days have reiterated their long-term bull case for oil or have increased the forecasts for prices. On Tuesday, the analysts at Barclays said they were raising their Brent Forecast to an average of $66 per barrel in 2021 and 2022, up to $71 per barrel of Crude. They argue that they still see demand rebounding in the second half of this year.
Christyan Malek at JP Morgan said, “At the oil market level it’s the kind of medicine the industry needs as it keeps big producers cautious and further slows investment. On balance this correction could end up being quite constructive for the price as it keeps the brakes on capital, which is what you need for a supercycle to develop.”