As the global economy recovers from the impact of the pandemic, demand for crude oil is set to rise. Wall Street believes that the rally in prices has enough potential to move up in the near future.
Francisco Blanch, the commodities strategist of Bank of America, stated in a research note that oil might hit $100 per barrel next year. Prices of other commodities such as copper, lumber, and various metals have remained within range. However, crude oil continues to retain its bullish trend.
BofA Global Research predicted a rise in Brent crude prices for this year and the next. It states that a tighter oil supply and an increased demand could make oil as costly as $100 per barrel in 2022. This estimated increase in crude oil prices can impact equity portfolios as well. But, Bank of America forecasts that the US shale will increase production to lead Brent crude price southwards to $65 per barrel by 2023.
Factors that could lead to oil price hike in 2022
Blanch has further laid down a few factors that he considers will contribute to a sharp oil price rise in 2022. Firstly, there would be an exponential rise in mobility after a prolonged lockdown of more than 18 months. The demand for crude oil will possibly skyrocket globally. Secondly, people would avoid mass transit leading to an increase in private vehicle use.
Although the demand is set to bounce back to pre-pandemic levels, supplies might not be up to the mark. Major world economies are now switching to clean energy to meet the goals of the Paris Agreement. Moreover, government and judicial policies aim to reduce the limit of carbon emission. This might affect the supply of crude oil worldwide, putting OPEC in total control of the world oil market in 2022.
What is the crude oil market scenario right now?
Brent crude oil is currently trading at price levels unseen since the last quarter of 2018. As of now, Brent crude is priced at $74.63 per barrel. Interestingly, the price of Brent crude soared near about 88% in the past year.
West Texas Intermediate crude oil, could reach as high as $95 for each barrel within next September. It closed at $73.66 per barrel on Monday’s trading.
Bank of America is not the first agency to predict an oil price rise of up to $100. Goldman Sachs and Glencore hinted last week that oil could possibly touch $100. The good news is, the crude oil price will climb down in 2023 after touching the $100 mark due to increased production and supply.