Brent Oil to dive towards $64 by year-end – MUFG

During August, oil prices gyrated wildly but ended the month lower (Brent -4.4% MoM). Strategists at MUFG Bank continue to lean neutral-to-bearish on oil for the remainder of 2021.

Two counterbalancing forces 

“There appears to be hesitancy to push the market in either direction at the current juncture, likely leaving the front-end in a holding pattern for the remainder of this quarter.”

“Fundamentals remain supportive of a tight global oil market in the near-term, owing to the marked velocity of the vaccine-induced demand acceleration (notably across developed markets), alongside inelastic supply (tepid shale growth, delayed Iranian barrels to market and only steady OPEC+ production increases).”

“There remains downside risks to emerging markets demand stemming from the still highly contagious delta-variant, alongside steadily rising US shale, the prospect of (eventual) higher Iranian supply and potential weaker OPEC+ compliance (or higher production pledges in line with US pressure.”

“We continue to lean neutral-to-bearish on oil, with Brent to regress lower and end Q3 and Q4 2021 at $73/b and $64/b, respectively.”