Oil Could Soar to $100 in 2022 If Supply Can’t Outpace Demand

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Oil prices dominated economic news headlines this week when crude spiked 4% in a single day to $81.22 a barrel, its highest point in two months. That price might seem like a bargain by summer, as some investment experts predict oil could surge above $100 a barrel in 2022.

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A lot depends on the balance of supply and demand. Many industry observers expect demand to rise this year on speculation that global air travel will return to pre-pandemic levels. That’s no sure thing with the omicron variant leading to rising case loads in many parts of the world.

Even so, investors and analysts are bullish on the prospects of much higher oil prices in coming months.

Damien Courvalin, head of energy research at Goldman Sachs, told reporters during an energy outlook briefing last week that $100 oil was possible if air travel continues to recover, CNBC reported.

“We’ve already had record high [oil] demand before this newest variant, and you’re adding higher jet demand and the global economy is still growing,” Courvalin said. “You see how we will average a new record high in demand in 2022, and again in 2023.”

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He added that there are two paths that could lead to $100 oil. One is that costs rise as oil companies ramp up production. The other is that the supply of oil can’t meet demand as economies around the globe reopen. Courvalin even said it’s “quite conceivable” that oil could rise as high as $110 under the right supply-demand scenario.

Related: While Wages Technically Rose in 2021, Inflation Lead to 2.4% Pay Cut for Workers

Analysts, Energy Traders Bet on $100 Oil

Courvalin’s not the only one who thinks oil could hit triple digits this year. Many energy traders are also betting that U.S. oil prices will rise above $100, Barron’s reported. The outlet cited comments from RBC Capital Markets analyst Michael Tran, who wrote in a Jan. 9 note that he has “yet to encounter a market bear this year, whether on the commodity side, equity investor or with corporate clients.”

During the preceding week, calls for $100 West Texas Intermediate oil had increased by 10%, Tran wrote.

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There is also increasing anxiety that oil supplies are growing too slowly, and that OPEC doesn’t have enough spare capacity if demand starts to exceed pre-pandemic levels.

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Tran claims that OPEC and its allies, known as OPEC+, have not been adding supply as quickly as the group had projected. According to his calculations, there were “14 million missing barrels last quarter that were penciled into balances that have simply not shown up.”

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.

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