Oil prices could go as high as $100 a barrel next year on the back of “very easy monetary policy” and reflation trade, Amrita Sen, chief oil analyst at Energy Aspects, told Bloomberg in an interview.
“It’s a futures market, we always discount stuff that’s going to happen in the future, now. That’s why prices are rallying right now,” the analyst said on the Bloomberg Surveillance program.
“We’ve always called for $80 plus oil in 2022. Maybe that is $100 now given how much liquidity there is in the system. I wouldn’t rule that out,” Sen noted.
On Monday, Brent Crude prices hit $60 a barrel, rising above that threshold for the first time since the start of the COVID-19 pandemic early last year.
In terms of prompt fundamentals, Energy Aspects’ Sen thinks, like some other analysts, that the market has gotten ahead of itself, “because right now demand is still relatively weak.”
However, the second half of the year does look much, much healthier in terms of demand, the analyst added.
Like other analysts and Torbjörn Törnqvist, chief executive at one of the world’s largest independent oil traders, Gunvor, Sen also sees headwinds to price gains at oil above $60, as U.S. production is set to begin rising.
According to Energy Aspects, U.S. oil output will not go back to pre-COVID levels any time soon, if ever, because producers are more focused on shareholder returns right now.
Last week, Törnqvist told Bloomberg that oil prices were unlikely to soar much above the $60 per barrel mark, considering that this price level would incentivize a lot of oil supply, including from the United States.
“We are at price levels which will look increasingly attractive to producers, so we would expect to see some producer flows coming into the market, which should provide some resistance to prices,” ING strategists Warren Patterson and Wenyu Yao said on Tuesday.
“Looking at the WTI forward curve, while the curve is in backwardation, prices all the way through to the end of 2022 are above US$50/bbl,” they said.
By Tsvetana Paraskova for Oilprice.com
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If Brent crude hit $60 despite the fact that the bulk of the global economy is still virtually in lockdown, it will probably rise to $80 this year with the widening of the global rollout of vaccines and continues its surge to $100 by next year. It will certainly be aided by a projected global supply deficit that could hit 15 million barrels a day (mbd) by 2022/23 triggered by the global oil industry delaying (probably indefinitely) $131 bn of oil and gas projects that were slated for approval in 2020.
Furthermore, the fundamentals of the global oil market are projected to strengthen further with the global vaccine rollout leading to a wider opening of the global economy and enhancing global oil demand. To this could be added the insatiable thirst of China and India for oil. The IMF projects that China’s economy will grow at 8% this year and India’s at 8.3%.
Since the first announcement about a breakthrough in the development of effective anti-COVID vaccines, I have been saying that Brent crude oil price will hit $60 in the first quarter of 2021 rising further to $70-$80 in the third quarter and averaging $60-$65 in 2021. Moreover, Global oil demand is projected to recover to pre-pandemic level of 101 million barrels a day (mbd) by the middle of 2021.
High oil prices invigorate the global economy by stimulating the three biggest chunks that make up the global economy, namely, global investments, the economies of the oil-producing countries and the global oil industry thus creating more demand for oil.
And despite the surging oil prices, I doubt very much that we will see a comeback by US shale oil production to pre-pandemic levels now or ever. The crucial situation facing the shale oil industry is that its fate is now in the hands of OPEC+.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
the reasons are that A. there is no shale oil- it is a myth
which is lie perpetrated by wall street and commodity traders to keep prices lower.
B. USD is depreciating and this will add 'fuel to the fire' besides there is china -india-pakistan border war all these three factors will drive oil prices very high.