The possibility of oil prices hitting $100 per barrel is becoming a popular forecast among Wall Street analysts. Goldman Sachs is the latest firm to raise its crude target for the next 12 months, citing lower OPEC supply and higher demand as the key factors.
Goldman’s head of oil research, Daan Struyven, and his team stated, “We have nudged up our 12-month ahead Brent forecast from $93/bbl to $100/bbl as we now expect modestly sharper inventory draws.” They believe that the lower OPEC supply and increased demand will outweigh the higher supply from the US.
Currently, West Texas Intermediate (CL=F) is hovering above $90 per barrel, while Brent crude futures (BZ=F) reached $94 per barrel during the session. Crude futures have seen a 30% increase in the past three months due to output cuts from major oil producers and their allies and export constraints from Russia.
The need for higher oil prices is evident for major oil-producing countries like Russia and Saudi Arabia. Russia requires funding for its ongoing conflict with Ukraine, while Saudi Arabia needs capital for various domestic projects in the coming years.
Goldman analysts predict that OPEC will be able to maintain prices in the range of $80 to $105 in 2024. They also believe that Brent is unlikely to drop below $80 per barrel next year due to the strong influence of OPEC.
Citi’s global head of commodities research, Ed Morse, also sees the potential for oil prices to reach $100 per barrel. However, he points to a possible pullback in prices due to increased supply from non-OPEC countries like the US, Canada, and Brazil. Citi’s analysts predict oil to average $84 in the fourth quarter of 2023 and move to the low-$70 range in 2024.
RBC Capital Markets recently raised the possibility of oil reaching $100 per barrel based on the momentum in the market. Analysts Michael Tran and Helima Croft noted that while $100 per barrel is not their base case scenario, the current oil market has become as much momentum-based as fundamentally based.
As oil prices continue to rise, concerns arise about the impact on inflation, consumers’ wallets, and the Federal Reserve’s interest rate policy. Analysts are closely monitoring the supply and demand dynamics, as well as geopolitical factors affecting major oil-producing nations.
In conclusion, the forecast of oil prices hitting $100 per barrel is gaining traction among Wall Street analysts. Factors such as lower OPEC supply, higher demand, and geopolitical tensions contribute to this outlook. However, the market remains dynamic, and supply-side factors could lead to price corrections in the future. Investors and market participants should closely monitor oil market dynamics and analyze the potential impact on various sectors of the economy.