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$100 Oil Is Now A Distinct Possibility

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, some of the world's largest commodity trading groups say.

There is a chance for $100 oil, Jeremy Weir, chief executive officer at commodity trader Trafigura, told the FT Commodities Global Summit on Tuesday.

"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.

The largest commodity traders are bullish on oil in the near term, too.

Brent Crude traded at over $73.50 a barrel early on Tuesday, but the top executives of the trading houses see further upsides.

"Higher from here" for the next six months, Glencore's Head of Oil Marketing, Alex Sanna, told the same event today. According to Sanna, better news about vaccination programs, inflation bringing in investor cash, and the demand recovery will all contribute to rising oil prices.

Related: China’s Oil Imports To Drop After Refinery Margins Near $0

Russell Hardy, the chief executive officer of the world's biggest independent oil trader Vitol, also said that $100 per barrel oil is "of course a possibility," but warned the overenthusiastic bulls that "we're in a slightly artificial market at the moment," as the OPEC+ group still has around 5.5 million barrels per day (bpd) to bring back to the market, by April 2022 per current plans.

According to Hardy, diesel demand globally is now back to pre-pandemic levels, gasoline demand will return to pre-crisis levels in the fourth quarter, petrochemical demand is already ahead of 2019 levels, while jet fuel consumption is still a long way behind, as summed up by Financial Times Energy Editor David Sheppard.

Global oil demand will not peak until "around 2030," while a faster decline is to be expected only after 2040, Hardy told the FT summit.

Despite the decisively bullish oil price forecasts, Vitol's CEO doesn't see a new supercycle in oil. "It's a more contained situation than 2008," he said.


By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on June 15 2021 said:
    With the way the global demand for crude oil and also other commodities has been surging for the last ten months, I won’t discount the very real possibility that oil could be headed to a new supercycle.

    Global oil demand is virtually back to pre-pandemic level of 101 million barrels a day (mbd). Moreover, many bullish factors are joining hands to push global oil demand higher than the pre-pandemic level. That is why Brent crude oil price has surged to $74 a barrel.

    I won't be surprised if Brent hits $80 much earlier than my original projection of this happening in the third quarter of this year.

    At this moment, global oil demand doesn’t yet justify $100 oil. But we could hit $100 in the fourth quarter of 2022 or the first quarter of 2023 because of a supply deficit estimated at 10 mbd triggered by reduced investments in oil exploration and production.

    During recent weeks, the global oil industry has come under unprecedented and concerted attacks from environmental pressure groups, courtrooms and boardrooms and noticeably from the International Energy Agency (IEA) to force it to divest of its oil and gas assets as a way to reduce global emissions.

    Significantly reduced investments in developing new resources—which are already low after the 2020 oil price collapse—could lead to a supply crunch down the road. This will, in turn, result in oil price spikes even beyond $100 a barrel.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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