The international oil price "Tiger Tiger Shengwei" hit a new high for seven consecutive years, and the next step is to go straight to $100?

For 7 consecutive weeks, international oil prices have been raging and rising like a rainbow, constantly refreshing new highs in more than seven years. As of press time, Brent crude oil futures for April delivery in London were priced at $92.74/barrel, and WTI crude oil futures for March delivery on the New York Mercantile Exchange were quoted at $91.32/barrel. Surges in demand and sluggish supply have heightened the call for more, as if the $100 oil price is within reach.

The recent rise in international oil prices is the result of a combination of factors such as the recovery in demand, the continued tensions between Russia and Ukraine, the OPEC+ pressure to maintain a small production increase plan without fear of the United States, and the fact that the snowstorm may affect the operation of the Texas oil well in the United States. The sharp rise in oil prices has quickly "returned" to oil companies that have been hit hard by the epidemic, but crude oil at this price level will also exacerbate global inflationary pressures, causing headaches for central banks and governments.

Daniel Yergin, an energy strategy expert and vice chairman of IHS Markit, concluded on social media that oil prices reflect "a crisis market" (geopolitical tensions in Ukraine and beyond) under tight supply-demand fundamentals (rising demand and limited capacity).

In 2008, international oil prices rose to more than $140, after which U.S. shale oil production grew rapidly, OPEC refused to cut production and started a price war, and oil prices fell sharply. When oil prices slowly returned to $60 or 70, the covid-19 pandemic destroyed demand, oil prices fell to the bottom, and for the first time in history, negative oil prices appeared. Since the beginning of this year, the prices of the two major crude oil futures, which are the world's major crude oil pricing benchmarks, have risen by about 17% since the beginning of this year.

WTI oil price trend

How far are oil prices from returning to triple digits?

OPEC and its allies (OPEC+) met on February 2 and decided to maintain a production increase of 400,000 bpd in March. However, there are questions about whether the above production increase target can be achieved, as some members of the alliance have not been able to meet the quota target in the past few months. Data from S&P Global Platts Energy shows that the 19 countries with quotas produced 832,000 barrels per day of crude oil in December 2021 than the target product. If it continues, it will exacerbate the tight supply in the market and bring upward pressure on oil prices.

Goldman Sachs, which has always been bullish, was the first investment bank to shout that oil prices would break through $100 a barrel. Goldman Sachs predicts that by the end of the third quarter of this year, brent crude oil prices will reach $100 / barrel.

In late January, Morgan Stanley analysts said the crude oil market was facing low inventories, low spare capacity and low investment at the same time, and the bank raised its summer price forecast by $10/b, and predicted that Brent oil prices and WTI oil prices would reach $100 and $97.5 per barrel, respectively.

Bank of America has also raised its expectations for oil prices, predicting that brent and WTI oil prices will reach $120 and $117, respectively, by July. JPMorgan believes that if geopolitical risks escalate, oil prices may rise to $120/ barrel.

CITIC Futures believes that from a fundamental point of view, OPEC+ may not be able to achieve full production before May, although the US output shows signs of acceleration, but the growth is still slow, the supply is tight in the first quarter to continue; refinery cracking profits reached a new high, supporting the start of construction to maintain a high level, terminal gasoline consumption rebounded, diesel consumption remained high, aviation coal consumption is still recovering, demand is not turning; low inventory superimposed below the seasonal accumulation, oil prices will still be strong in the short term.

Shale oil remains a key factor in determining price action.

ConocoPhillips said recently that traders should worry about strong U.S. crude oil production growth this year and next, and a possible repeat of the surge in shale oil supply over the past decade. After ExxonMobil and Chevron announced plans to significantly increase production in the Permian Basin, ConocoPhillips also raised its forecast for the growth of U.S. crude oil production this year. The company's chief executive, Ryan Lance, said on a conference call that U.S. crude oil production will grow by as much as 900,000 barrels per day this year.

That's more than a third higher than the IEA's forecast. For global markets, an excessively rapid rebound in shale oil production will create more variables. For example, in the last round of shale oil production surge, OPEC took the initiative to launch a price war.

The wood Mackenzie research team at energy consultancy predicts in its annual outlook that oil prices are unlikely to rise to $100 a barrel and will not be sustainable at least in 2022. The company believes that under the influence of OPEC+, the crude oil market will once again return to equilibrium in 2022. Demand in the third quarter will increase by an additional 4.5 million b/d to return to pre-pandemic market demand levels of 100 million bpd/ per day, while supply will add an additional 4.8 million b/d, about half of which will come from OPEC+. In terms of inventories, there will be a surplus of crude oil in the first quarter of 2022 – and no supply shortages are expected. "Brent crude oil prices will average $70 per barrel in 2022, slightly lower than the 2021 average price."

However, Wood Mackenzie also pointed out that the Russian-Ukrainian issue and Belarus/Poland/EU are potential flashpoints that may pose a threat to the crude oil market.