Highlights:

• Year to date, Brent prices have been up by nearly 30% to US$ 67/bbl, one of the fastest increases in decades. The climb is set to continue well into summer, and we project prices to peak at just below US$ 75/bbl by the end of Q3.
• A quick global recovery will push up demand strongly, against a tightly disciplined supply of OPEC+ and a slower than in the past pick up in US shale production. Stronger supply and growth normalization is then set to gradually drive prices back within the range of US$ 60 to 65/bbl, which suits both US and most of OPEC producers.
• Energy equities’ recent outperformance still has legs. Higher oil prices will push earnings further up keeping valuations attractive. The ESG score is a negative but the cyclical upturn and low positioning bode well at least in the short term.
• Oil sector credit looks cheap to fundamentals but will remain hindered by its poor ESG profile especially as the ECB might decide to underweight Oil bonds in its purchase programs.

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