The last time oil prices were above $100 was in 2014, having stayed above that range for more than a year.
Unless international talks end sanctions on Tehran and increase Iranian exports, governments’ efforts to push for an economic recovery are likely to escalate tensions in tight oil supplies and send prices to new peaks. Oil price set to test new peaks except Iran High energy prices are fueling global inflation already at multi-decade highs in Europe and the United States. The last time oil prices were above $100 was in 2014, having stayed above that range for more than a year.
International oil prices fell below $100 a barrel on Tuesday due to a possible disruption in exports from major oil producer Russia following President Vladimir Putin’s decision to recognize the independence of two separate regions in eastern Ukraine. Tensions with the West increased.
Prices are well off their record high of over $147 in July 2008.
Yet, as was the case in 2008, when it took less than five months to reach record levels from nearly current levels, the world had to provide a cushion against rapid economic growth, tight supplies and geopolitical shocks. Lack of additional capacity.
As the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, are expected to ease production cuts implemented in 2020 in response to record demand declines at the height of the COVID-19 pandemic, -Reduces gradually, JP Morgan predicts that Maker Group will continue incremental growth but underperformance by some members will drive prices up.
“Supply constraints are increasing. Market recognition of stressed potential is also increasing,” the bank said. “We believe this should lead to a higher risk premium … at $125 a barrel in the second quarter of 2022 and $150 a barrel in 2023.”
Bank of America (BofA) Global Research said on Tuesday that increased summer travel and falling excess capacity could push prices up to $120 a barrel.
Iranian barrel
Not so soon, Citi analysts say. They point to a possible end to US sanctions on OPEC member Iran as diplomats on both sides say talks are progressing.
A deal could add about half a million barrels per day (bpd) to the market by April or May, and 1.3 million bpd by the end of the year, compared with growth from Canada, Brazil, Iraq by about 2.8 million bpd. Venezuela and the United States may push prices below $65 a barrel.
“Most market analysis of prices for the coming year has focused on the lack of surplus production capacity and ignored the possibility of Iranian oil returning to the markets,” Citi said.
Research consultancy Energy Aspects offered more upside, saying the lifting of restrictions should not bring prices below $80 this year.
At the heart of a more cautious outlook is the possibility that price increases will lead to more production of shale oil under the southern United States.
“Up to 2.2 million bpd of US tight oil could be used in the event of a supercycle – oil prices remain around or above $100 a barrel,” said consultancy Rystad Energy.
While prices could drive higher production, RBC Capital Markets commodity strategist Michael Tran doesn’t expect much of an impact on demand.
“We see upward visibility this summer for prices to touch or flirt with $115 a barrel or more… rumblings in markets due to tighter product and raw materials are difficult to address, a demand destruction. There is no event or increase in supply, neither of which appears to be on the horizon.”
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