• Brent crude oil prices expected to remain elevated in winter months as OPEC+ remains undeterred by calls to increase production faster than planned
  • Sustained underinvestment in oil and gas E&P over last few years likely to lead to oil price spikes in 2023 and beyond as demand continues to recover
  • We raise our average Brent crude oil price forecasts for 2021/2022 to US$70-75/bbl and US$75-80/bbl respectively, and introduce 2023 average Brent crude oil price forecast at US$85-90/bbl
  • Apart from oil proxies, we believe asset owners and oil service providers should see earnings recover as well as E&P capex potentially picks up from the lows

OPEC+ in no hurry to boost production higher than planned. In its latest meeting last week, OPEC+ members decided to stick to the 0.4mmbpd monthly output increase despite calls for more production. To recap, OPEC+ countries plan to increase production every month by 0.4mmbpd and exit the production cuts in an orderly fashion by end of September 2022. The lack of material response from US shale drillers to the oil price increase so far seems to be one of the reasons that the OPEC+ bloc remains comfortable with oil prices above US$70/bbl and enjoying the higher oil revenues.

We could see even higher oil prices in 2023 and beyond. 2022 should still represent a reasonably balanced market, as OPEC+ has surplus capacity. But, looking further ahead, we believe there could be oil price spikes towards US$80/bbl or higher in late 2022 and beyond, once demand recovers to pre-COVID levels, with air travel still recovering well into 2023, and OPEC spare capacity is down to normalised levels. The severe systemic underinvestment on the upstream side in recent years could have an impact on non-OPEC supply growth.


Oil proxies should remain in favour, and potential capex revival could rejuvenate oil services. After years of underinvestment, we could see the current period of sustained high oil prices incentivising some recovery in upstream capex, especially from the NOC front. Thus, apart from our top oil price proxies CNOOC and PTTEP, we would also keep a keen watch for signs of emerging green shoots for the downstream services sectors