Crude oil prices could hit $100 a barrel
Prices for crude oil have surged. Analysts now say global prices could hit $100 a barrel, with American benchmarks breaching $90.
Why it matters: The rise in oil prices is another reason inflation is set to stick around for a while.
The big picture: Since collapsing amid the worst of the COVID crisis, prices for oil have rebounded sharply. Here's why...
- Demand is back. Global consumption is forecast to recover completely from the pandemic in 2022. (IEA)
- OPEC and Russia have been relatively slow in boosting supplies, helping to keep prices up. (NYT)
- Geopolitical risk has risen, especially given there's a chance that Russia — the world's third-largest producer — invades Ukraine and finds itself subject to sanctions. (Brookings)
What they're saying:
- Goldman Sachs: "Robust fundamentals have reversed last year’s oil price melt-down, with the market remaining in a surprisingly large deficit."
- Morgan Stanley: "We estimate that the oil market is heading for simultaneously low inventories, low spare capacity and still low investment — a triple deficit."
- JPMorgan: "Any disruptions to oil flows from Russia in a context of low spare capacity in other regions could easily send oil prices to $120."
What's next: On Feb. 2, OPEC and Russia will meet and decide whether to boost production in order to ease pricing pressure. Don't hold your breath.