Increasing demand in the conditions of tightening supply will cause a significant surge of oil prices by the end of 2023 according to the UBS analysts.
The investment bank sent out a note to clients this week, warning that Brent crude will go from its current price of $90 per barrel to $95 per barrel. On the other hand, WTI crude, which is sourced in the United States, will jump from $85 per barrel to $91 per barrel.
“We still see scope for global oil prices to rally,” UBS wrote in the note.
According to UBS, the global demand for oil in August will hit record levels.
The decision of OPEC+ to voluntary cut their production is among the biggest reasons for the surging oil prices. OPEC+ countries have been slashing their production since September and will continue to do so by 2024 at least.
The initial expectation was that OPEC+ would produce around 5 million barrels less per day. The production cuts haven’t reached this level yet, however, hovering around 3.3 million barrels per day. This still caused the oil supply deficit last month compared to a surplus of 600,000 barrels per day from the same period in 2022.
