Oil prices to rebound to $125 in coming months, says UBS

Oil prices to rebound to $125 in coming months, says UBS

LONDON:  Oil prices are likely to rebound to $125 in the coming months due to tight market supply, declining spare capacity and low oil inventories, according to Swiss bank UBS. In a research note on Thursday, UBS strategists said the latest remarks by Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman about a disconnect between oil futures prices from market fundamentals and that OPEC+ has the means to deal with market challenges including cutting production at any time, suggests “there is a desire to defend oil prices to stay above the level of $90 per barrel”.

“We continue to believe that fundamentals point to higher prices. Spare capacity is below 2 million barrels per day, and oil inventories stand at a multiyear low,” authors of the UBS report said. On Wednesday, Kuwait’s Deputy Prime Minister and Minister of Oil Mohammad Al-Faris repeated statements made by other energy ministers and industry analysts that “structural supply weaknesses caused by years of underinvestment have led to extremely limited worldwide spare capacity”.

This situation has contributed to “extraordinary volatility in the oil markets at a time when these markets need stability like never before to allow participants to plan future production capacity increases to meet rising demand”,