Oil at $100 per barrel is a possibility if momentum in the crude market keeps going, according to Wall Street analysts.
“The notion of $100/bbl has evolved from completely unimaginable a few short months ago, to within striking (or hyping) distance today,” Michael Tran and Helima Croft at RBC Capital Markets wrote in a note to investors on Thursday.
West Texas Intermediate (CL=F) snapped a nine-day rally on Thursday to settle at $86.87. Brent crude futures (BZ=F) fell fractionally to $89.92per barrel.
“The idea of $100/bbl remains far from a base case scenario for us, but we have learned to respect that this oil market has evolved into as much of a momentum-based market as it is a fundamentally based one when thinking about near dated prices,” said the note. “It often overshoots and overcorrects.”
Earlier this week Saudi Arabia announced an extension of its unilateral production cuts for the next three months. Russia also reduced its exports by 300,000 barrels per day through year-end. These cuts are in addition to OPEC+ reductions that started at the end of last year.
The reductions are squeezing supply as crude futures have rallied more than 25% since late June despite China’s slower-than-expected economic recovery and increased production output by US producers.
“Our figures suggest tightness through the balance of the year, as Riyadh and Moscow remain committed to output cuts,” wrote the analysts, forecasting an average price of $86.50 per barrel for WTI and $91 barrel for Brent International in the final quarter of this year.
Goldman Sachs analysts believe Brent crude could reach $107 per barrel by December 2024, if OPEC+ keeps some of its reductions in place into next year.
“Consider a bullish scenario where OPEC+ keeps the 2023 cuts announced in April 2023 fully in place through end-2024, and where Saudi Arabia only gradually raises production by just 250kb/d per month in early 2024,” wrote analyst Daan Struyven and his team in a note to investors earlier this week.
“Our pricing framework suggests a mechanical $14/bbl of upside to our December 2024 forecast of $93/bbl under this bullish scenario, which would put Brent at $107/bbl,” said the note.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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