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DBS Group Research analysts Suvro Sarkar, Ho Pei Hwa and Jason Sum have increased their Brent crude oil price forecast for 2021 to US$55 to US$60 ($72.98 to $79.62), as oil prices have gone off on a bullish start for the year.

Brent crude oil prices are currently close to US$56 per barrel as at Jan 22, having begun the year at US$52 per barrel.

According to the analysts, prices have been climbing steadily over the last few weeks from US$40 per barrel levels that were last seen in November 2020.

&ldquo We had expected oil prices to cool off a bit in 1Q2021 owing to a rise in lockdowns to tackle the second wave of Covid-19 infections in certain parts of the world and seasonally weak demand patterns (refinery maintenance season),&rdquo they write in a Jan 22 report.

&ldquo However, a series of positive newsflow over the initial weeks of 2021 has provided significant momentum to oil bulls,&rdquo they add.

The analysts&rsquo increased forecast stands at around 30% to 40% above 2020&rsquo s average of US$43 per barrel.

&ldquo We are likely to see a much better year for oil in 2021, as demand recovers (by around six million barrels per day or mmbbpd by our projections, after falling around 9 mmbpd in 2020), while supply remains curtailed by OPEC+ production cut agreements (increasing by around 3.0mmbpd by our projections, less than the demand increase),&rdquo they say.

The way they see it, positive drivers for the increase in oil prices are coming in &ldquo thick and fast&rdquo .

First, it was the OPEC+ meeting during the first week of January, which saw members agreeing to raise production by a very slight +0.2 mmbbpd over the next two months.

It was followed by Saudi Arabia declaring that it would voluntarily cut production by 1.0 mmbbpd from its January levels over the next two months, likely also due to the lower demand from travel restrictions due to Covid-19.

Then came the announcement of a higher-than-expected drawdown in US crude oil inventories of 11 million barrels for the last two weeks.

&ldquo Coupled with vaccine rollout optimism and hopes of further US fiscal stimulus measures, oil prices appear relatively well supported for the foreseeable future,&rdquo say the analysts.

However, a few key risks remain, including the increasing production from Libya, which is exempt from the OPEC+ agreement.

There is also the possibility of a less hawkish stance on Iran from the Biden administration, which could bring back Iranian barrels into the market chances of dissent among OPEC+ members faster-than-expected comeback from US shale over the year and hiccups in the revival of the global economy.

&ldquo Taking these into consideration, we believe it will not be a one-way street up from hereon, but we are still likely to see oil at US$60 to US$65 per barrel levels sometime in 2Q2021 and 3Q2021 as seasonally stronger demand conditions prevail, assuming OPEC+ discipline holds,&rdquo they say.

On this, Sarkar, Ho and Sum have also started their 2022 average Brent crude oil price forecast of US$60 to US$65 per barrel.

The analysts also foresee the recovery of the oil and gas (O& G) sector to continue into 2021.

&ldquo Most O& G blue chip names recouped more than half of their losses in market capitalisation during the selldown in January to March 2020. We believe the rally has legs and will continue this year, driven by oil prices and demand recovery following vaccine rollout globally,&rdquo they say

Thus, they have recommended investors to &ldquo buy&rdquo the oil proxies, which &ldquo are preferred to ride the oil price uptrend&rdquo .

Of those, CNOOC is the analysts&rsquo top pick in Asia, with a target price of HK$12 ($2.05), with the current price weakness due to the blacklisting by the US&rsquo s Commerce Department &ldquo a buying opportunity&rdquo .

&ldquo We also like Sinopec (target price: HK$4.80), Thailand&rsquo s PTT (target price: 50 baht or $2.21), and Thai Oil (target price: 67 baht).

As at Jan 26, 5.14pm (SGT), Brent crude oil is trading at US$55.89 per barrel.

Shares in CNOOC closed at HK$7.60, while shares in Sinopec closed at HK$3.76 on Jan 26