Oil prices are set to rise to $60 a barrel by the end of next year as the oversupply will have been drawn down by then, according to Citigroup, which is bullish on oil.

Growing economies will lead to global oil demand returning to the pre-coronavirus levels in late 2021, Citi’s global head of commodities research Ed Morse told Bloomberg in an interview.  

According to Citigroup, Brent Crude prices – which slumped below $40 a barrel last week amid growing concerns about demand – are set to average around $55 per barrel next year and recover to $60 a barrel by the end of 2021. WTI Crude – at $37 early on Monday – is expected to jump to $58 per barrel by the end of next year.

Another major bank, Goldman Sachs, also sees prices hitting $60 a barrel and even more next year.

Goldman Sachs expects Brent Crude to reach $65 a barrel in the third quarter of 2021, although it could end the year lower, at $58 a barrel.

Goldman Sachs also expected West Texas Intermediate to rally to $55.88 a barrel by the third quarter of next year, up from $51.38 a barrel in earlier forecasts, Business Insider reports.

“There is a growing likelihood that vaccines will become widely available starting next spring, helping support global growth and oil demand, especially jet,” Goldman’s analysts said.

Investment banks are more bullish about next year, but oil traders are bearish about the short term. One of the top independent traders, Trafigura, expects a “supply-heavy” market through the end of the year, with inventories building by the end of 2020 as demand recovery stalls. 

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The market will get worse before it gets better, Ben Luckock, Co-Head of Oil Trading at Trafigura, said on a conference on Monday, as carried by Bloomberg. The oversupply on the market is reaching the point where chartering tankers for floating storage becomes profitable, according to Luckock.

Last week, reports emerged that the world’s top oil traders have been chartering dozens of supertankers for potentially storing oil at sea amid signs that demand recovery has stalled. 

By Tsvetana Paraskova for Oilprice.com

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