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Bank of America: Brent Oil Could Hit $100 by Year-End on Cold Snap

For now BofA sees Brent oil at $75 at year-end, but 'weather is quickly becoming the most important driver of energy markets.'

Oil prices, which have stalled since a 45% surge in the first half of the year, could reach $100 a barrel for Brent crude by year-end if there’s a big cold snap, says Bank of America.

“We continue to project that oil prices will remain range-bound in the second half of 2021 and maintain our average Brent crude oil forecast of $70 for this period, although we now target Brent to be at $75 by year-end, as we see growing upside risks,” writes Francisco Blanch, commodity strategist at Bank of America Europe.

“In line with this view, we project deficits over the coming months that should support oil prices into year-end.”

On the bearish side, “A new Covid-19 wave, taper tantrum, a China debt crisis, and the return of Iranian crude barrels could push oil lower,” Blanch said.

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“However, weather is quickly becoming the most important driver of energy markets. If the winter turns out to be much colder than normal, global oil demand could surge by 1 million to 2 million barrels per day.

“Under this scenario, the oil market deficit this winter could easily exceed 2 million barrels per day, and our $100 oil target for the middle of next year could quickly be rolled forward six months.”

Brent recently traded at $73.68, up 1%.

Another bullish factor: “[Global] demand is coming back and OECD oil inventories just dropped to the 10-year average,” Blanch said.

“Looking at U.S. total product demand, we note that volumes are already back to prepandemic levels in aggregate.”