Oil prices are headed towards $80 a barrel, which will translate into a hefty boost in pump prices, as OPEC+ continues to successfully throttle oil production while world demand for crude surges.
International oil prices will average $75 a barrel in 2019, and might even hit $80 this summer, predicts global investment bank RBC Capital Markets, which again revised its oil price forecast higher Thursday. RBC previously forecast international Brent crude for 2019 at $69.50 per barrel. It also boosted its outlook for U.S. West Texas Intermediate crude to $67 per barrel from $61.30 for the year.
RBC said the journey towards $80 oil is being propelled by steep OPEC+ supply cuts, continuing robust demand, stubborn geopolitical risk (trade wars) and investor positioning that leaves crude futures with more than enough leeway to rise.
“We see price risk asymmetrically skewed to the upside spurred by geopolitically infused rallies that could shoot prices toward or even beyond our high-end, bull-case scenario and test the $80/bbl mark for intermittent periods this summer,” said RBC strategists Michael Tran, Helima Croft and Christopher Louney in a research note.
Brent hit $71.78 and WTI rose to $64.79 this week, the highest levels since November 2018. This means Brent will have rallied 32 percent while WTI would have seen its price boosted by 40.5 percent so far this year.
The long-to-short ratio is presently skewed towards the long (or bear) position while a shortage of bullish bets means “there is room to run to the upside given that geopolitical hotspots are still a clear and present danger for the market, but many wounded bulls remain following the Q4′18 washout,” said the RBC analysts, referring to the sudden collapse in oil prices at the end of 2018.
RBC expects OPEC to extend its deal to limit production and boost oil prices so as to keep the cost of crude near the $75 to $80 range many producers need to balance their budgets.