Top commodity traders expect oil to return to $100 per barrel as a lack of production response from OPEC+ group has left output running well below consumption, resulting in an increase in prices.
On Tuesday, oil prices rose nearly 2 percent to their highest in more than two years. Brent crude was up 69 cents at $74.68 a barrel on Wednesday morning owing to a drop in inventories and recovery in demand. Prices will continue to rise, experts said.
During the Financial Times (FT) Commodities Global Summit, Russell Hardy, chief executive of Vitol, the world’s largest independent oil trader, said $100 oil was a “possibility”.
“There’s 5m barrels of spare production being held back from the market today,” FT quoted Hardy as saying.
Jeremy Weir, executive chair of Trafigura said he was concerned by the lack of spending on new supply because the world was not ready to make the leap to clean energy and complete electrification, FT reported. Trafigura is one of the world's largest independent oil traders.
According to the report, Alex Sanna, the top oil trader at Glencore, also said that $100 oil was looking more likely.
“If you’re cutting supply without at the same time addressing your demand that is when you can get price dislocations. You’re really only one or two events away from a material spike in oil prices," the report quoted Sanna as saying.
Meanwhile Fitch has increased its 2021 and 2022 oil price assumptions for Brent and WTI benchmarks due to stronger year-to-date prices.
According to Fitch, oil demand is likely to continue to grow in the second half of 2021 if vaccination rollouts are successful and pandemic-related restrictions are eased. However, new breakouts, particularly of new COVID-19 variants will remain a risk for sustained recovery in oil demand.
OPEC+ Group's planned production increases will help meet growing demand but will be insufficient to balance market in the second half of 2021, Fitch noted.
(Writing by Seban Scaria; editing by Daniel Luiz)
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