Vetiva Forecasts $105/b Brent Price

Vetiva Capital Management Limited, an investment finance and research Group, has predicted an average Brent price of $105 per barrel for 2022 full year.

The analysts, in a second half (H2), 2022 outlook report titled ‘A strange labyrinth’, disclosed that the projection for Brent price is supported by continuous recoveries in global oil demand as well as slower supply growth from Organisation of the Petroleum Exporting Countries (OPEC) amid production hitches from its members.

The Oil & Gas analyst at Vetiva, Victoria Ejugwu mentioned that “the oil market may continue to face tightness given low supply prospects and soaring demand; as such, prices are expected to remain elevated.”

She noted that, a significant downside risk to oil prices remains the possible reemergence of the virus, saying, “the virus is here to stay with us, with new variants springing up from time to time. We saw what happened with China in Q2, with the virus putting Shanghai on lockdown.

“Despite vaccination efforts, re-infections could stem lockdowns and movement restrictions. This remains a downside risk for oil prices, as movement and travel restrictions could stifle demand.”

Ejugwu also noted that, although OPEC has consistently eased production cuts, Nigeria’s crude output has however remained below agreed quotas.

She asserted that, “despite the fact that OPEC has been unwinding production caps, Nigeria’s crude output has fallen below expectation. This has been due to some operational problems, as well as issues stemming from insecurity. Given this, our outlook for the country’s production is somewhat cautious and do not expect a significant deviation from current production levels.”

She further said that, “while oil prices have soared higher, the industry continues to contract, due to underproduction. Given this, we anticipate further contraction in Q3, 2022 of seven per cent depreciation and a marginal 0.1 per cent growth in Q4, 2022.”

Speaking on the downstream sector, Victoria highlighted the impact of PMS price regulation on profitability margins.

According to the Oil and Gas analyst, “with the oil price rally we have seen this year, the Nigerian government continues to maintain subsidy payments, keeping PMS retail pump price at N165 per litre. As such, gross margins of about five per cent from PMS sales have remained thin.”

Vetiva is a Pan-African Financial Services Company incorporated in Nigeria and duly regulated and registered by the Nigerian Securities & Exchange Commission (SEC) to carry on business as an Issuing House and Financial Adviser.