International oil prices brushed a new seven-year high triggering the market 'breaking through $100' conjecture

International crude oil prices rose to their highest level since October 2014 on Wednesday. The International Energy Agency (IEA) said earlier that abundant crude oil demand had proved that the economy could withstand the impact of Omi Kerong, and the crude oil market may be tighter than previously thought.

As of Wednesday's close of trading (Jan. 19), U.S. West Texas Light Crude (WTI) futures for February delivery on the New York Mercantile Exchange rose $1.53 to close at $86.96 a barrel, brushing a nearly seven-year high of 1.79%. However, as of press time, WTI crude oil futures fell back to $86.50 per barrel, and Brent crude oil was quoted at $87.83 per barrel.

In its monthly report released on Wednesday, the IEA said crude oil demand was expected to return to pre-pandemic levels. The IEA also said global demand remains strong, inventories are falling rapidly, and OPEC+ is working to restore production. "This further suggests that production may be lower than the market estimates, or that consumption may be higher than estimated."

Rebecca Babin, senior energy trader at CIBC Private Wealth Management, said: "The market has already finished pricing the tighter market in 2022 and the IEA and other institutions are simply catching up on this trend. Babin added, "Crude oil still has the ability to extend its rally, and the market is sensitive to any risk event in which oil prices rise." ”

Yemen's Houthi forces launched a drone strike on the UAE capital, Abu Dhabi, on Monday, killing at least three people. The attack has revived the alarm of security risks in the world's major crude oil export region. In addition, the recent civil unrest in Libya, one of OPEC's members, has also hampered the growth of local crude oil production.

An explosion broke out Tuesday at a major pipeline from Iraq to Turkey's Mediterranean port, which connects northern Iraq to Turkey's Mediterranean port of Ceyhan, a key pipeline for Iraq's oil shipments to Europe. The blast is also the latest in a series of supply hits to the oil market in recent months, allowing WTI oil prices to break through $86 a barrel on the day.

Agencies look at $100 oil prices

The boom at the start of the year prompted Goldman Sachs to raise its forecast for oil prices, with the bank expecting Brent crude to reach $100 a barrel in the third quarter of the year.

BNP Paribas also joined the $100 investment bank today, with analysts such as David Martin raising their 2022 Brent and WTI crude oil price forecasts in their latest reports, averaging $6.50, while also raising their 2023 oil price forecasts by $10.50.

"The probability of oil prices touching $100 is rising." Analysts at BNP Paribas said, "It needs to be emphasized that our expectations are based on the premise that 'Iranian production recovers in July'." If no deal is reached by then, the market could tighten severely, causing inventories to plummet and oil prices to hold above $100. This, in turn, could lead the government to limit oil subsidies, exacerbating the drag on demand. ”

While the U.S. may once again join forces with other consumers to release crude inventories, the IEA said in its report that global oil inventories have fallen sharply over the past 12 months, "since the peak in May 2020, inventories have fallen by more than 1 billion barrels, well below pre-pandemic levels." ”

Daniel Hynes, senior commodities strategist at ANZ Group, said in an interview: "Liquidity and demand have generally remained relatively good. The supply situation looks significantly tight, which will allow these markets to be well supported. ”

Recently, U.S. energy stocks have also risen with oil prices, with ExxonMobil up 19.48% year-to-date, Marathon Oil up 16.32%, and Chevron up 9.85%. Jim Kramer, a well-known stock commentator who has long been unpretentious about energy stocks, said: "The reality is changing, I changed my mind. From a money manager's perspective, this reversal is not shameful. ”

Kramer noted that "when oil prices rise, U.S. energy companies don't spend a lot of money injecting new supplies into the market, but become more cautious." Their restraint has left the entire industry breathless, which is a major reason why crude oil is now $86 a barrel. ”