Recovering global oil demand could send oil prices to $100 a barrel at some point at the end of 2022, despite COVID challenges to demand this coming winter, according to one of the world’s largest independent oil traders, Trafigura.
“Not just the price, but the level of backwardation we are seeing is telling us the market is hungry for oil,” Saad Rahim, chief economist at Trafigura, said during the virtual Argus Asia-Pacific Crude Forum on Thursday, as carried by Argus.
Oil demand worldwide has recovered enough from the coronavirus and the variants this year to put the oil market in a “much healthier place,” Rahim said.
We could see $100 oil next year, probably at the back end, “if conditions are right,” Trafigura’s chief economist said at the Argus forum.
In the middle of this year, before the Delta variant hit the U.S. and economies in Asia and Europe, the world’s largest commodity trading groups, including Trafigura, said they would not rule out crude oil prices hitting $100 a barrel.
Although oil may not be headed to a new supercycle, prices still have room to rise from current levels because of a strong demand rebound and expected tightness in supply, top executives at the commodity traders told the FT Commodities Global Summit in June.
There is a chance for $100 oil, Jeremy Weir, chief executive officer at Trafigura, said back then.
“You need higher prices to incentivize… and also maybe to build on the cost of carbon in the future as well. You also need to attract capital in the business,” Weir told the online debate.
Trafigura’s Rahim now says that oil at $100 continues to be a distinct possibility if conditions are right.
Market conditions are pointing to demand recovery. The volume of floating stocks globally has normalized, and U.S. inventories are below the five-year average, Rahim told the Argus forum.
U.S. inventories of crude oil and the most used refined oil products have now fallen to below the 2018 levels, energy research service HFI Research estimated last week.
By Tsvetana Paraskova for Oilprice.com
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