Oil prices could easily hit a $100 dollars per barrel after the OPEC+ collapse in their talks, the former U.S. Energy Secretary, Dan Dan Brouillette told CNBC this Tuesday. “You could very easily see oil hitting $100 a barrel; potentially even higher.” He said during an interview.
Firstly, as we reported previously, the forecast for $100 per barrel is not new; back on June, the Bank of America also warned about the potential increase. The Bank had dais. “We believe that the robust global oil demand recovery will outpace supply growth over the next 18 months; further draining inventories and setting the stage for higher oil prices.”
Secondly, the Bank also noted that if OPEC+ and Iran flooded the market with their production, oil prices could be hit. The bank expects that consumption will grow and rebound strongly this year and next; by 5.6 million and 3.6 million bpd respectively, the fastest growth rate since at least the 1970s.
However, it cautioned that ample OPEC+ spare capacity; and the return of Iran barrels will cap oil prices this year.
Thirdly, Dan Brouillette also spoke about the matter to the CNBC; he said that while on the one side is likely that oil prices hit $100 per barrel; it is also likely that they collapse. Specially as the inability from OPEC+ to reach an agreement over production.
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Oil prices at $100 per barrel would destroy demand
Moreover, he remarked. “If there isn’t any agreement on production; and countries tend to go off and do their own thing, or do their own production; you could have a collapse of oil prices.” The news comes just after OPEC+ failed to reach agreement on their meeting, as the United Arab Emirates and Saudi Arabia clashed over relaxing production curbs, or extending them to 2022.
In addition, according to the CNBC, the OPEC allies, which includes Russia, are seeking to increase supply by 400,000 barrels per day from August to December 2021; they also proposed extending the duration of cuts until the end of 2022.
After the collapse of OPEC+ talks, oil prices soared to three-year highs. This Tuesday they surged even higher. The U.S. crude, the West Texas Intermediate was trading at $76 per barrel; while Brent got higher than $77 per barrel.
On the other hand, such increase in prices also comes with the risk of inflation. Specially as the U.S. Federal Reserve surprised investors in June by saying it might raise rates; and also, it would end emergency bond buying much faster than previously expected.
Finally, oil expert Dan Yergin, vice chairman of HIS Markit, quoted by the CNBC, said that Oil prices topping $100 would destroy demand. “I think countries recognize that $100 barrel oil would not be in their interest.”