Big investment banks are raising their price targets for oil — or warning they may soon need to — as crude futures hit levels not seen since the early days of a slump in December 2014.
Bank of America Merrill Lynch and Morgan Stanley both upped their forecasts for crude prices this week, while Goldman Sachs said the risks of prices overshooting its current targets are mounting.
The banks says the long-oversupplied oil market is tightening up more quickly than expected as global economic growth fuels demand and output cuts by OPEC, Russia and several other producers eat into the world's crude stockpiles. The 14-member OPEC cartel has also boasted better adherence to output limits than in the past, according to analysts.
On Tuesday, Merrill Lynch analysts said they now expect the oil market to be undersupplied by about 430,000 barrels a day in 2018, up from their prior forecast for a 100,000-barrel-per-day deficit.
The bank now sees Brent averaging $64 a barrel in 2018, versus an earlier estimate for $56 a barrel. Merrill also raised its outlook for U.S. crude to $60 a barrel from $52.