Oil executives and analysts predict that benchmark oil prices will continue to climb this year and surpass the $100 per barrel mark.
This comes after much of the losses incurred due to the selloff triggered by concerns over the banking sector have been recovered.
US crude prices experienced a volatile period this week, culminating in its sharpest increase in almost six months. On Thursday, oil prices rose over 1%, supported by a decline in US crude stockpiles and a halt to exports from Iraq’s Kurdistan region.
Brent crude futures climbed by 1.3%, increasing by 99 cents to $79.27 per barrel, while West Texas Intermediate crude rose by 1.9%, or $1.40, to $74.37.
According to Craig Erlam, a senior market analyst at OANDA, the Brent and WTI benchmarks are presently trading at lows seen from early December to early March, and any break beyond the $100 psychological threshold would be monitored closely.
Goldman Sachs reportedly stated that China’s oil demand is set to recover while Russia’s exports will be impacted by sanctions, implying that oil prices could surpass $100 this year. Jeff Currie, who oversees commodities research at Goldman, suggested that by May of this year, “oil markets should flip to a deficit of supply compared to demand,” potentially leading to further increases in oil prices.
Supply & Demand
Keith Hill, the CEO of Africa Oil, has asserted that a lack of spending on oil production will result in higher prices.
US oil firms, concerned about supply increases and price declines, have held onto their earnings and have been slow to expand production and heavily invest in new wells.
Hill told Proactive, “I think it’s virtually impossible for oil to remain below $100 a barrel for an extended period over the next five years. The lack of investment in our sector during the past decade has made it nearly impossible to keep up with rising demand.”
With 38 years of experience in the oil industry, working for major companies like Occidental Petroleum and Shell Oil Company, Hill stated that the transition to the low-carbon energy sector of the future is one of the most significant challenges ever faced.
“We must be cautious about prematurely turning off system A. Although renewables are beginning to catch up, they will be unable to keep up with the rapid increase in energy demand, particularly given that some oil is starting to dwindle,” Hill noted.
Hill also added, “If you look at the US shale, it has most likely reached its peak and is beginning to decline. I believe some of the Middle East’s significant fields are becoming old and exhausted. Over the next five to ten years, I believe we will see a supply-driven price squeeze.”
Hill pointed out that oil prices have the potential to surprise in the short term.
Hill said, “Prices may fluctuate if there is a geopolitical risk or if the global economy slows down due to a pandemic. They may rise or fall.” “However, the long-term outlook for oil prices is unchanged. We don’t have enough supply to meet demand. Five years ago, when individuals were anticipating lower oil prices, I was the only oilman who predicted that oil would hit $100 again, and of course, it came true,” he added.
Africa Oil, run by Hill, is the sole public-listed independent oil and gas firm with access to the exciting Venus light oil discovery and associated gas field off the coast of Namibia’s Orange Basin. According to Wood Mackenzie, it is the “largest oil discovery in the world in 2022.”
The Ukraine conflict remains a critical variable in the global supply outlook since Russia usually supplies one out of every ten barrels in the global 100-million-barrel-per-day market.
