Rapid rise in crude is not sustainable, according to BofA strategists

Rising oil prices won’t last long, US equity strategists said on Friday. Bank of America Corp., just as crude crossed the threshold of US $ 85 a barrel for the first time since 2018.

“The price of oil is 30% above the fair value levels implicit in our analysis, one of the largest spreads [entre el precio del crudo y el valor razonable implícito] observed in the last 15 years, ”wrote the strategists led by Sebastian Raedler in a note to their clients. “We believe that an increase in the price of oil – considering the strength of the US dollar, a weakening of growth momentum and a rebound in crude production – is likely to be unsustainable.”

The BofA strategists’ assessment follows a projection released this week by the bank’s chief commodities director, Francisco Blanch, that oil prices could hit $ 100 a barrel. The current deficit could increase by 50% during the winter months if cold temperatures prompt energy providers to switch from gas to oil, Blanch said in an interview with Bloomberg TV on Wednesday.

Governments around the world are battling a global energy crisis that threatens to thwart an economic recovery and exacerbate inflationary pressures.

BofA equity strategists said that a drop in prices of the Petroleum In the coming months, in the face of a sudden recovery in supplies, it would help European energy stocks to underperform this year 15% below the broader benchmark. Recent increases provide additional incentives for producers to increase production, but at the same time reduce demand.

Furthermore, strategists expect the US economy to slow further, while they see room for further gains in the dollar, a scenario consistent with lower commodity prices.

Bank experts take a bearish view of European stocks, alluding to a number of downside risks to the macroeconomic outlook, including the recent energy crisis, a worsening of supply chain disruptions and the intensification of the energy crisis. debt in China’s real estate sector. Its baseline scenario calls for a 10% correction to the continent’s Stoxx 600 benchmark by year-end.