SberCIB forecasts Brent to rise to $135 per barrel in the third quarter

Oil rises in price due to increasing supply risks.SberCIB Investment Research expects seasonal growth in demand for raw materials in the world and further price increases to multi-year highs in the third quarter of BRENTBRENT $104.12 -1,9% LUKOIL LKOH ₽5 450+2,56% Buy Rosneft ROSN₽415.1 -0,93% Buy

Brent oil prices in the third quarter of 2022 may rise to $135 per barrel and even exceed this level due to increased demand for raw materials due to the seasonal factor and a rapid recovery in demand in CHINA, analysts at SberCIB Investment Research predict.

June futures for Brent crude on the London ICE exchange are trading near the level of $105 per barrel as of 16:55 Moscow time. In the coming months, seasonal growth in global demand for raw materials can be expected, experts say. In the base scenario, Brent crude prices will remain close to $110 per barrel in the second quarter, and may rise to $135 or more in the third quarter. After that, prices will gradually decrease, but still remain above $100 per barrel until the end of the third quarter of 2023.

The historical maximum price of Brent was recorded in 2008 - over $143 per barrel.

Growth will continue not only due to the seasonal factor, but also due to the rapid recovery in demand in China, which is one of the largest oil importers in the world. Presumably, quarantine restrictions in the country will end on the eve of summer, and Labor Day, which China celebrates in May for a whole week, may still be an opportunity to boost domestic tourism, SberCIB Investment Research notes. However, the increase in the incidence in China is still ongoing, experts added.

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The oil market has become very volatile, experts from SberCIB Investment Research say. At the auction on March 7, the price of futures for Brent oil rose to $139 per barrel. Oil quotes rose against the backdrop of increased geopolitical risks.

Since then, the price has dropped by more than $30. The reason was only the proposal of the UAE Ambassador to the United States to accelerate the increase in production by the states that are members of OPEC, analysts said. In their opinion, when prices change by $10 in any direction several times a day, market makers do not want to take risks and leave the market.

As long as investor interest in the oil market is so low and market uncertainty is so high, analysts believe that $20 price fluctuations during the week can become the new normal for oil quotes.

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Experts do not rule out that in April the price of Brent oil may drop to $90-95 per barrel, but for this, several unfavorable factors must appear simultaneously. These include the resumption of the nuclear deal with Iran, signs of serious discussions in OPEC + about a faster increase in production, and reduced demand for raw materials from China . A significantly smaller than expected drop in Russian supplies could also be a negative factor for the oil market, SberCIB Investment Research reported.

The ability of oil prices to rise to $120, $130 or even a new record high of $150 a barrel this summer will largely depend on a possible reduction in oil supply from Russia.

“The most optimistic scenario assumes prices to rise to $130 per barrel in the second quarter, $170 in the third and $180 in the fourth quarter of 2022. Such an increase is possible if OPEC's free capacity falls below market expectations, which will prevent the alliance from continuing to increase production in the fourth quarter of 2022, ”the analysts said.

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