Oil to breach $100 per barrel this year, warn analysts

The demand for oil has held steady while supplies have been hit by production shortfalls from the Organization of the Petroleum Exporting Countries and its allies (OPEC+). OPEC has been unable to produce the agreed quota and the demand is outpacing the rise in production.

Various geopolitical tensions have also contributed to the rise in oil prices. These include the fear of possible invasion of Ukraine by Russia, possible sanctions on Russia by US, Europe, as well as US-Iran talks to revive the nuclear deal.

The Omicron variant of coronavirus did not have as big of an impact on business and travel as initially expected - which did not prove to be as disruptive to oil prices.

Oil to hit $100 per barrel soon, warn these analysts

Goldman Sachs: Analysts from Goldman Sachs said that brent oil prices are primed to rise above $100 per barrel later this year, adding that the oil market remains in a "surprisingly large deficit" as demand hit from the Omicron coronavirus variant is so far smaller than expected.

The analysts see Brent prices at $90 per barrel in the first quarter of 2022, $95 in the second quarter and $100 per barrel in the last two quarters.

"We expect the increase in OPEC+ production to fall even further short of quotas in 2022, with an only 2.5 million bpd increase in production expected from the next nine hikes,'' analysts wrote in a note last month.

Morgan Stanley: Morgan Stanley analyst Martijn Rats thinks that slow-growing oil supply is going to put more pressure on prices to rise. The only way that prices will stabilize or fall is if demand falters. And that’s only likely to happen at higher prices, in his view.

“If Brent were to stay at $88 per barrel, spending on oil would amount to about 3.5% of global GDP this year,” he wrote in a note published last month.

Bank of America: Bank of America analyst Francisco Blanch expects Brent headed to $120 per barrel by the middle of the year. He noted that some economies are still sputtering, and oil demand is not at pre-pandemic levels.

Bank of America expects the dollar to stay strong, which is one reason Blanch thinks that oil could fall back to $80 in the second half of the year.

“Yet a pro-cyclical global macro backdrop could support crude near triple digits in the second half of 2022 if the dollar weakens,” he said in a note.