SUBSCRIBE NOW Just 99¢ for your first month

ADVERTISEMENT

ADVERTISEMENT

Oil prices could hit $100 as demand outstrips supply, analysts say

Analysts say oil prices will be supported by the reluctance of many governments to restore the strict restrictions that hammered the global economy when the pandemic took hold in 2020.

Oilfield technicians work with a drill at a rig of Ecuador's state oil company Petroamazonas in Tiputini
Oilfield technicians work with a drill at a rig of Ecuador's state oil company Petroamazonas, in Tiputini, Ecuador, on October 19, 2017.
Daniel Tapia/REUTERS
We are part of The Trust Project.

LONDON, Jan 12 — Oil prices that rallied 50% in 2021 will power further ahead this year, analysts predict, saying a lack of production capacity and limited investment in the sector could lift crude above $100 a barrel.

Though the Omicron coronavirus variant has pushed COVID-19 cases far above peaks hit last year, analysts say oil prices will be supported by the reluctance of many governments to restore the strict restrictions that hammered the global economy when the pandemic took hold in 2020.

Brent crude futures traded above $84 on Wednesday, hitting two-month highs.

"Assuming China doesn't suffer a sharp slowdown, that Omicron actually becomes Omi-gone, and with OPEC+’s ability to raise production clearly limited, I see no reason why Brent crude cannot move towards $100 in Q1, possibly sooner," said Jeffrey Halley, senior market analyst at OANDA.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are gradually relaxing the output cuts implemented when demand collapsed in 2020.

ADVERTISEMENT

However, many smaller producers can't raise supply and others have been wary of pumping too much oil in case of renewed COVID-19 setbacks.

"We don’t want to see $100 a barrel. The world is not ready for that," Omani Oil Minister Mohammed Al Rumhi was quoted as saying by Bloomberg on Tuesday.

Morgan Stanley predicts that Brent crude will hit $90 a barrel in the third quarter of this year.

With the prospect of depleting crude inventories and low spare capacity by the second half of 2022, and limited investments in the oil and gas sector, the market will have little margin of safety, the bank said.

Standard Chartered, meanwhile, has raised its 2022 Brent forecast by $8 to $75 a barrel and its 2023 Brent forecast by $17 to $77.

J.P. Morgan analysts also expects oil prices to rise as high as $90 by the end of the year.

Current demand strength is acting as a near-term tailwind, having proved largely immune to surging coronavirus infections, the bank said.

(Reporting by Bozorgmehr Sharafedin Editing by David Goodman)

ADVERTISEMENT

What to read next
Russia's defense ministry said on Saturday its troops and allied separatist forces were now in full control of Lyman, the site of a railway junction west of the Siverskyi Donets River in the Donetsk region that neighbors Luhansk.
The commitment, published at the end of three days of talks, was weaker than a previous draft of the final communique seen by Reuters, which had included a target to end unabated coal power generation by 2030. Sources familiar with the discussions said Japan and the United States had both indicated they could not support that date.
Lyman, site of a major railway hub, has been a front line target as Russian forces press down from the north, one of three directions from which they have been attacking Ukraine's industrial Donbas region.
The tests show the North is committed to making technical progress on its weapons programs, analysts say. But North Korea's state media has been unusually silent.