Is the current rise in oil prices $ 100 per barrel?

Repsol oil refinery in Cartagena, Spain.
Image Credit Climb Bloomberg

Dubai Pilgrimage: The rise in oil prices, which began earlier this year, could head north and reach $ 100 a barrel, according to the International Monetary Fund.

Many other analysts predict an increase of more than $ 90 by the end of the year.

According to MUFG, the current production capacity is not enough to meet today’s vaccine-led demand. At the time of the outbreak, several members of the OPEC + production team cut off production and have been struggling to meet recovery needs ever since.

Although these are not our basic issues [affecting supply and demand] In his memoir, Ihsan Khoman, head of the EMFG Emerging Market Research and Development Agency (EMAA), noted that inflation has pushed up supply prices to $ 100, even during the transition period.

“The market is not cycling but is a major structural investment such as energy transfer and ESG. [Environmental, Social, and (Corporate) Governance] Estimates after the oil boom of 2010-14 have limited capital expenditures.

Increased interest

In a recent report, Goldman Sachs said that renewed global oil demand could increase Brent crude oil prices by more than $ 90 a barrel. The US Investment Bank said it expects demand for oil to reach 100 million barrels a day (BDP) before the Covenant-19.

Oil trends

Oil trends
Image Credit Catch MUFG

Strong global supply and demand pushed up oil prices for several years last Monday. Brent Crude’s future is set at $ 85.99 per barrel. The contract reached a record high of $ 86.70 per barrel, the highest level since October 2011. West Texas Intermediate (WTI) crude futures hit $ 85.41 a barrel, the highest since October 2014. However, both Brent and WTI crude oil standards were not accepted during the week. Brent Crude was at $ 84.38, US WTI was at $ 83.57 in New York on Friday.

Although these are not our basic issues [affecting supply and demand] As markets move from price recovery to current supply shortages, oil prices could be positively boosted, albeit during the transition period, to $ 100 / b.

– Ihsan Khoman, Head of Emerging Market Research EMEA at MUFG

MUFG supply congestion is being hit by severe body supply shortages – strong OPEC + production, accelerated gas-oil substitution, China’s energy shortages and the inability of producers outside OPEC + to meet growing demand. During this period, the decline in commodities is accelerating, which results in higher prices.

Transition profit?

“With the epidemic’s inventory depleted, our modeling estimates show that oil prices between $ 100-110 / b will fall on demand. Process, ”said Coman.

According to MUFG forecasts, the massive market deficit, which began in June 2020, will not be oversupplied until Q2 2022. Given the tightness of the oil market, MUFG Brent forecasts Q4 2021 and Q1 2022 at $ 85 / b and $ 82 / b respectively. . After that, the market is expected to return to a modest profit, with prices to $ 74 / b, $ 72 / b, and $ 66 / b in Q2, Q3 and Q4 2022, respectively.

Price key drivers

Difficult supply chain constraints include (i) rapid OPEC + product increases, (ii) accelerated gas-oil replacement, (iii) China’s power crisis, and (iv) non-OPEC + replenishment. Interest.

In the long run, MUFG expects the market to return to structural deficit by 2023 as ESG forces are being towed.

“Indeed, if policy makers are to meet the goals of large-scale green infrastructure, the price of oil (and large-scale energy commodities) must increase dramatically to encourage renewable investment. This is needed to offset the growing risks and complexities surrounding power transfers in long-term CAX projects, ”said Coman.

Indirect trend

Simply put, the long-term high price of oil, and the fact that the more popular fossil fuels (and larger fossil fuels) are increasing, will only cost more, because supply is declining (unlikely to be high until 2030). It will increase fuel prices.

“We do not expect oil prices to fluctuate between demand and supply in the coming decades,” Khoman said.

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