As crude oil prices surge, experts are starting to bet on a barrel of oil hitting the coveted $100 mark.
Price premiums for physical oil barrels are skyrocketing across the globe, with supplies from various regions, including the Middle East, Azerbaijan, and Russia, commanding higher prices as refiners scramble to meet the rising diesel demand.
Oil Markets Defying Gravity
Even with crude oil currently in the mid-$90s, many investment funds remain underinvested in the oil sector, leaving room for prices to climb higher.
In an interview with Bloomberg Monday morning, Chevron Corp. CVX CEO Mike Wirth expressed confidence in oil reaching $100 a barrel, adding weight to the bullish outlook.
The price of Brent Crude has risen by over 30% since its low point in March. With consumption hitting record highs and production cuts in Saudi Arabia and Russia tightening supplies, refiners are snapping up barrels to meet fuel production needs.
Amrita Sen, head of research at Energy Aspects, highlighted that the fundamentals are currently extremely strong. While Sen doesn’t predict a sustained average above $100, she acknowledges the potential for oil to briefly touch this milestone.
Examples abound in the physical markets, with Azerbaijani Azeri Light crude trading near $100 a barrel due to high profits in converting crude to diesel. Similarly, Russian barrels, once trading at a discount, are now commanding premiums in Asia.
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Chart: Major Oil Benchmarks Trade Above $90 A Barrel
Over the last three months, energy stocks represented by the Energy Select Sector SPDR Fund XLE have outperformed the Technology Select Sector SPDR Fund XLK by a significant margin of 20%. A similar relative performance has been achieved by the largest U.S. oil corporation, Exxon Mobil Corp. XOM, against Apple Inc. AAPL.
Even some of the most bearish market analysts are conceding the possibility of a $100 barrel, particularly in light of the ongoing political risks in oil-producing countries such as Libya and Nigeria.
Despite the surge, some bearish analysts believe oil could temporarily breach $100. However, they expect supply growth from countries outside the OPEC+ alliance, such as the U.S., Guyana, and Brazil, to ease the tight market conditions.
Impact On Consuming Nations
Rising oil prices are now shifting the focus to the impact on consuming nations. The Reserve Bank of India has warned that crude oil above $90 a barrel poses a new risk to global financial stability.
While Brent Crude hasn’t yet hit $100 this year, refined fuel prices, like gasoline and diesel, have remained above that level for months.
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This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.