Oil at $100! What am I bid!?
Prices for Brent crude this week hit a new high of $75 a barrel.

That level had not been seen for two years – before the advent of the Covid pandemic. But the price of oil has been steadily on the rise since the beginning of the year. 

    Analysts say that from January to June, prices for Brent and WTI have climbed by about 40 %. That served as a pretext to suggest that by next year, oil could shoot up to $100 a barrel.

    Six reasons for prices to rise

    Bank of America sees six reasons for a rise in the price of Brent next year to $100 a barrel. In overall term, the bank’s forecast is an increase to $68 this year and $75 next year.

    “Regardless, a combination of factors could push oil to $100 a barrel next year, mainly because of three key factors in terms of demand and three key factors in terms of supply,” Bank of America said.

    The factors behind the demand: Plenty of pent-up mobility demand after an 18-month lockdown, and mass vaccinations and the prevalence of private cars. People still prefer to move about in their own cars. And pre-pandemic studies show more remote work could result in more miles driven, as work-from-home turns into work-from-car.

    Factors behind supply: Reduced investment by companies in oil projects the world over linked to attempts to achieve the climate goals of the Paris agreement. A lack of willingness to invest in energy, a preference for investing in the financial sector and in sustainable development (ESG – Environmental. Social. Governance). A rise in public and legal pressure in favour of reducing greenhouse gas emissions.

    The bank does not rule out the Brent price hitting three figures next year should OPEC+ extend its strict policy of restricting output through to the second half of 2022. But if, according to forecasts, U.S. production of shale oil rises, the price could slip to $65 in 2023.

    Traders looking ahead

    The biggest world resource traders also forecast a return of oil prices to $100 a barrel against a background of a slowdown in investment in new supplies as demand hits a new peak and environmentally friendly alternatives begin to emerge.

  Senior managers at Vitol, Glencore and Trafigura take that level seriously given that prices this week had already hit maximums not seen for more than two years.

    Jeremy Weir, the CEO of Trafigura, one of the world’s leading independent oil traders, told the Financial Times Commodities Global Summit he was concerned about insufficient spending on providing new supply — as the world was not yet ready for a transition to clean energy and full electrification.

    “I actually think that there is a chance for oil to get up to those numbers,” he told the summit. “The issue for oil is not demand. . . the supply situation is quite concerning.” 

    Alex Sanna, the top oil trader at Glenore, said that $100 a barrel was looking more likely.

    “You’re really only one or two events away from a material spike in oil prices,” he said.

   The chief executive of Vitol, the world’s largest independent oil trader, said $100 a barrel oil was a “possibility”.

    Marco Dunand, co-founder of Mercuria, said he expected oil demand to recover to pre-pandemic levels and climb over 100 million bpd by the end of the year. 

    Torbjorn Tornqvist, chairman of Gunvor, said oil could well return to the $100 level, adding that a rise in prices was needed to stimulate investment in the sector.

    Traders have bought up call options tied to WTI reaching $100 by the end of next year – said by analysts to be the most widely owned on the New York Mercantile Exchange.    According to data from Quikstrike, more than 60,000 contracts have been concluded, covering more than 60 million barrels of oil.


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June 2021