Recently, oil prices have reached multi-year highs, with WTI oil prices even reaching their highest level since 2014 and oil distribution prices reaching their highest level since October 2018. More and more large investment banks are becoming optimistic about the medium to long-term prospects of oil, believing that there is still room for further price increases. As demand rebounds to pre pandemic levels, insufficient investment is leading to supply shortages, while a rebound in consumption and tight supply may further push up oil prices.

Part 1: Multiple investment banks are optimistic about the outlook for oil prices

Goldman Sachs predicts that oil prices will hit $90 per barrel by the end of this year, higher than the previous estimate of $80. The main reason Goldman Sachs raised its forecast is due to the recovery of global oil demand, rather than the continued weakness of supply from OPEC+producing countries.

Goldman Sachs also believes that oil prices will continue to rise in the coming years. The bank's strategist stated earlier this month that fundamental factors prove that oil prices will rise. He believes that oil demand will reach record highs next year and the following year, and the market faces the risk of potential years of supply shortages and significant price increases.

We firmly believe that the oil market is still in the early stages of a multi-year, structurally strong cycle, "analysts at Royal Bank of Canada said in a report in mid October

Last week, Morgan Stanley raised its long-term oil price forecast by $10 to $70 per barrel. BNP Paribas predicts that oil prices will approach $80 per barrel in 2023.

UBS expects good support for oil prices until 2020, with the market remaining tight until at least the first quarter of 2022, as OECD inventories hit their lowest level since 2015, OPEC+only gradually relaxed production cuts, and oil demand reached 100 million barrels per day in December 2021.

UBS analysts now expect oil prices to reach $90 per barrel in December until March 2022, followed by a slight correction in the remaining period of 2022, stabilizing at $85 per barrel.

Insufficient investment in part1 restricts oil supply

Analysts say that after 2022, oil prices may remain structurally high as oil demand continues to rise, while new supply will lag behind consumption growth. This is mainly due to insufficient investment in the past five years and pressure from oil giants to reduce emissions and invest in new supply.

Professionals say that if the oil market is to avoid the next supply shortage shock, global upstream spending needs to increase by 54% annually to $542 billion.

The President of Hess Company, an American oil producer, stated at the end of September that the oil industry is "severely underinvested" in supply and unable to meet growing demand. He believes that oil demand will return to pre pandemic levels as soon as the end of 2021 or early 2022.

According to data statistics, global upstream investment fell to $350 billion last year, the lowest level in 15 years.