Brent Oil Price Highly Likely to Move Above $100

We are highly likely to see Dated Brent moving above $100 per barrel.

That’s what Bjarne Schieldrop, the Chief Commodity Analyst at SEB, said in a new report, which was sent to Rigzone on Monday.

“It is now less than $5 per barrel away from that level and only noise is needed to bring it above,” Schieldrop said in the report.

“Tupis crude oil in Asia traded at $101.3 per barrel last week, so some crude benchmarks are already above the $100 per barrel mark,” he added.

In the report, the SEB analyst noted that, while Dated Brent looks set to hit $100 per barrel “in not too long”, SEB analysts are skeptical “with respect to further price rises to $110-120 per barrel as oil product demand likely increasingly would start to hurt”.

“Unless of course if we get some serious supply disruptions. But Saudi Arabia now has several million barrels per day of reserve capacity as it today only produces 9.0 million barrels per day, thus disruptions can be countered,” he added.

Schieldrop highlighted in the report that oil product demand, oil product cracks, and oil product inventories are a good thing to watch going forward.

“An oil price of $85-95 per barrel is probably much better than $110-120 per barrel for a world where economic activity is likely set to slow rather than accelerate following large interest rate hikes over the past 12-18 months,” Schieldrop said.

The SEB analyst outlined in the report that crude oil prices have been on a “relentless rise” since late June “when it became clear that Saudi Arabia would keep its production at 9.0 million barrels not just in July but also in August - then later extended to September and then lately to the end of the year”.

In a statement sent to Rigzone last week, Enverus Intelligence Research (EIR) said it has maintained that Brent prices will reach $100 per barrel by the end of this year “for several months”.

“Fundamental data released prior to our deadline of August 31 has been mixed, however, we are reaffirming our call that Brent prices will reach $100 per barrel by the end of this year,” Al Salazar, the Senior Vice President of EIR, said in the statement.

In the statement, EIR said its price call is contingent on three conditions.

“1/ Improving global economic sentiment, 2/ OPEC adherence to stated cuts, and 3/ Consistent OECD crude and product stock draws at or above 1.0 million barrels per day or more,” the company noted.

In a report sent to Rigzone last week, analysts at Standard Chartered projected that Brent would average $93 per barrel in the fourth quarter of this year.

“We do, however, caution that our forecast is a period average rather than a point forecast and hence does not rule out an intra-Q4 high above $100 per barrel,” the analysts said in the report.

In that report, the Standard Chartered analysts said “the rally in crude oil prices has continued over the past week, with Brent crude oil setting a series of new year to date highs, with the latest at time of writing $92.38 per barrel”.

“We think there is significant short-term upside, with the effects of the large Q3 supply deficit set to be augmented by further large inventory draws in Q4,” they added.

“In our view, the deficits are so large as to raise the firm possibility that OPEC will be able to bring back a significant tranche of output during Q4 while still keeping prices comfortably supported above $90 par barrel,” the analysts continued.

In another report sent to Rigzone last week, analysts at BofA Global Research said Brent prices could spike past $100 per barrel before year end “should OPEC+ maintain cuts against Asia’s positive demand backdrop”.

The U.S. Energy Information Administration’s (EIA) latest short term energy outlook (STEO), which was released in September, projected that Brent spot prices will average $84.46 per barrel this year. In its previous STEO, which was released in August, the EIA predicted that Brent spot prices would come in at $82.62 per barrel in 2023.

To contact the author, email andreas.exarheas@rigzone.com