Commerzbank Says Price Correction is Overdue
January 31, 2022
The Baker Hughes Rig Count was up 4 oil rigs to a total of 495 oil rigs. US oil rigs have risen by 323 since 8/21/20.
The geopolitical situations continue to add to the risk premium. The Russia – Ukraine concerns are still front and center and the concerns over Middle East issues between Iran backed Houthi rebels and Saudi Arabia, and UAE, that could create supply disruptions
OPEC+ production numbers are also supporting prices as despite OPEC+’s continued easing of their production cuts by 400,000 BPD each month they have not been able to meet these quotas. A lot of worries about supplies but rising oil prices do have some headwinds and one of those is that higher and higher prices will ultimately impact demand.
ANZ Bank raised its short-term price target for crude to $95/barrel as the market is seen remaining in deficit in the first quarter amid supply constraints. It also sees markets pricing in a sizeable risk premium. It said there are expected to offset headwinds from an Iran nuclear deal and a more hawkish U.S. Federal Reserve.
Commerzbank said oil prices are set to see sixth week of gains but there are no new reasons for a renewed increase as it is still likely over concerns about supply disruptions if the Ukraine crisis escalates. It believes a price correction is overdue.