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Monday, October 18, 2021

Analysts and Big Oil CEOs agree: Oil will soon cost $ 100 a barrel again

Oil prices are currently skyrocketing and have already reached their highest level since October 2018. But analysts and the heads of large oil companies believe that black gold will continue to rise in the next few weeks and months.

• CEOs of Shell, ExxonMobil and Total Energies believe in rising oil prices, but also more volatility
• Lower investments mean future supply shortages
Analysts also believe that oil demand will exceed supply

Oil is currently more expensive than it has been for a long time: Due to falling US inventories , the prices for Brent and WTI crude oil climbed to their highest level since October 2018 last week. The meanwhile severe slump at the beginning of the Corona crisis has been forgotten. But the end of the oil price rally is far from over, both analysts and the CEOs of the oil companies Royal Dutch Shell , ExxonMobil and TotalEnergies agree. They predict that the supply will be too short in the future and that oil prices will rise and even exceed the mark of 100 US dollars.

CEOs: Oil price up to 100 US dollars possible – despite increasing volatility

In many countries, the corona pandemic is currently subsiding thanks to increasing vaccination rates and the economy is recovering. According to “Bloomberg”, car and air traffic is also increasing again at the moment. In this environment, the demand for oil is increasing, as the energy transition has not yet progressed so far that fossil fuels can be dispensed with. However, because of the energy transition, there is currently not as much money being invested in oil production as it used to be, so the bosses of large oil companies are warning that the demand for black gold will soon exceed supply and keep prices skyrocketing. “I think that coming out of the pandemic and the lack of investment in our industry will aggravate the supply situation and force a shortage,” said Darren Wood, CEO of Exxon Mobil, according to Reuters, with a view to the Qatar Economic Forum the increasing economic recovery. Even if supply recovers and balances out over the longer term, the Big Oil CEO believes that “prices will likely be higher in the shorter term”.
Patrick Pouyanné, the CEO of TotalEnergies, also believes in a rising oil price. “There is definitely a chance of reaching US $ 100 [a barrel],” he said, according to Reuters. The last time Brent and WTI prices were at this level was in 2014. At the same time, however, Pouyanné also warned that “some lows” could be seen again in the coming years. However, according to the TotalEnergies boss, one is used to this volatility. Shell CEO Ben van Beurden also agreed with this assessment: “We will probably see both the oil price at 50 US dollars and 100 US dollars, but don’t ask me in which order,” he said, according to Reuters the Qatar Economic Forum.

Analysts are also bullish on oil

The heads of the oil multinationals, whose business – despite the ongoing realignment with a view to climate protection and renewable energies – would of course benefit from rising oil prices, are not alone with their optimistic forecast for fossil fuels. Even analysts still have some confidence in the oil price.
So raised the Bank of America according to “Reuters” recently announced their forecast for the Brent price and now believes that this can rise to 100 US dollars in the coming year due to a “tighter oil supply” – if only briefly. “We believe the robust recovery in global oil demand will outpace supply growth over the next 18 months, further depleting inventories, setting the stage for higher oil prices,” the bank wrote in a June 20 study, which is available to the news agency. Bank of America therefore raised its estimate for the average price of Brent crude oil for the coming year from 60 US dollars to 75 US dollars. The oil market will run a deficit of 900,000 barrels per day for the next six quarters, the US bank continued. The price jump that is therefore expected is unlikely to last for long in the end. Shale oil producers are likely to react to the higher prices by increasing production, pushing the price of Brent back to an average of 65 US dollars per barrel by 2023, according to the experts.

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According to the “Financial Times”, analyst Jeffrey Currie of Goldman Sachs also believes in a new super cycle for commodities and considers a price of 100 US dollars at least possible, even if his average price target for Brent in the third quarter of 2021 is only 80 US dollars each Barrel lies. But there is the potential for breakouts well above this level, according to Currie, according to Yahoo Finance. The global oil market is currently facing its largest deficit since last summer as the economic recovery is faster than expected and robust demand growth meets an almost inflexible supply curve.
Jeremy Weir of the commodity trading company Trafigura also said with a view to the $ 100 mark, according to the “Financial Times”, “there is a chance for the oil price to reach these numbers”. Much like the CEOs of the oil companies, he is concerned about the lack of spending on new oil supplies. “We’ve gone from 15-year reserves to 10 years. We’ve seen capital expenditures go from $ 400 billion a year five years ago to just $ 100 billion a year. That’s a concern on the supply side, “says Weir. And, in his opinion, that will “probably drive prices higher.”

 

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