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Jefferies: Fully Reopened World Could See $150 Oil

Low investment in oil while the world still runs mostly on fossil fuels could send oil prices to $150 per barrel when and if the world fully reopens, Chris Wood, global head of equity strategy at Jefferies, told CNBC on Wednesday.

“In a really fully reopened world, the oil price could go to a $150 dollars because the supply constraints are dramatic,” Wood said.

In recent years, the demonization of oil and gas, or as Wood described it—the “political attack”—on fossil fuels, has reduced investment in the fossil fuel industry, which still supplied 84 percent of global energy demand in 2020.

“The issue for me is not the oil price, the issue is the pandemic. The oil price is gonna go higher in a fully reopened world because nobody’s investing in oil but the world still consumes fossil fuels,” Wood told CNBC.

Much higher oil prices would escalate the inflation fears, he added.

Although the oil market currently frets about the potential impact of the new Covid variant on global oil demand, consumption will sooner or later rebound again, even if it dips in the coming months. At that point, be it in 2022 or 2023, supply could be struggling to meet demand, also because of the shrinking capacity within the OPEC+ group to boost production.

Low spare capacity could drive oil to triple digits as soon as 2022, JP Morgan analysts said in a report earlier this week. Crude oil could soar to $125 per barrel next year and $150 in 2023 due to OPEC’s limited capacity to boost production, JP Morgan says.

“While we believe a three-month pause to 400,000 barrel-per-day monthly increments is needed during the first half of 2022 to balance the market (and potentially a cut pending impact of new COVID variants), the group will struggle to deliver monthly growth of more than 250,000 barrels per day once reinstated,” JP Morgan’s analysts led by Christyan Malek wrote.

By Tsvetana Paraskova for Oilprice.com

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Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.  More