Will we see oil at $100 a barrel again?
Bank of America thinks crude will hit $100 a barrel at some point the next five years as demand picks up.
Brent crude has gained 23% to around $64 a barrel this year. Its gains have already surpassed the most bullish of forecasts, says Avi Salzman for Barron’s. Bank of America thinks crude will hit $100 a barrel “from time to time” over the next five years. Before 2014 crude regularly traded above $100. That era ended when US shale drillers began to pour millions of new barrels onto global markets.
There are two key factors currently capping oil below $100 a barrel. First, energy cartel Opec and ally Russia are currently withholding about seven million barrels per day (mbpd) of production to prop up prices; economic recovery this year will cause them to turn on the taps and flood the market. Second, the green-energy transition means that some analysts think the world may already have passed peak oil demand. The energy transition is “real” and welcome, but things are moving “glacially”, says Dylan Grice on themarket.ch. Bloomberg projects that electric vehicles “will only make up around 8% of the total fleet of passenger cars by 2030... The oil market will continue to play a central role” for decades.
A serious price spike could finish off crude sooner than that, reckons Ambrose Evans-Pritchard in The Daily Telegraph. Low prices and the rise of environmental, social and governance (ESG) investing have sent investment in new oil capacity plummeting: annual non-Opec investment is running at just 35% of pre-2014 levels – far too little to meet global demand.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
As demand picks up over the next five years, that could send prices going as high as $150 a barrel. Above $100, oil becomes pricier than already existing green alternatives, delivering the coup de grâce to oil and sending producers spiralling. Paradoxically, the “greatest threat to Saudi Arabia and Russia over the next five years is a roaring bull market for crude oil”.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Alex Rankine is Moneyweek's markets editor
-
Will a Santa Rally bring festive cheer to investor portfolios this year?
Investors will be hoping for a seasonal stock market boost in December
By Marc Shoffman Published
-
ChatGPT turns two: how has it impacted markets?
Two years on from ChatGPT’s explosive launch into the public sphere, we assess the impact that it has had on stock markets and the world of technology
By Dan McEvoy Published
-
4Imprint makes a strong impression – should you buy?
4Imprint, a specialist in marketing promotional products, is the leader in a fragmented field
By Dr Mike Tubbs Published
-
Invest in Glencore: a cheap play on global growth
Glencore looks historically cheap, yet the group’s prospects remain encouraging
By Rupert Hargreaves Published
-
Should you invest in Trainline?
Ticket seller Trainline offers a useful service – and good prospects for investors
By Dr Matthew Partridge Published
-
Key takeaways from the MoneyWeek Summit 2024: Investing in a dangerous world
If you couldn’t get a ticket to MoneyWeek’s summit, here’s an overview of what you missed
By MoneyWeek Published
-
DCC: a top-notch company going cheap
DCC has a stellar long-term record and promising prospects. It has been unfairly marked down
By Jamie Ward Published
-
How investors can use options to navigate a turbulent world
Explainer Options can be a useful solution for investors to protect and grow their wealth in volatile times.
By James Proudlock Published
-
Invest in Hilton Foods: a tasty UK food supplier
Hilton Foods is a keenly priced opportunity in an unglamorous sector
By Dr Matthew Partridge Published
-
HSBC stocks jump – is its cost-cutting plan already paying off?
HSBC's reorganisation has left questions unanswered, but otherwise the banking sector is in robust health
By Dr Matthew Partridge Published