Executives from Vitol, Glencore and Trafigura and Goldman Sachs said on Tuesday that $ 100 of crude was a real possibility, with prices already hitting their highest level in two years this week as Brent crude exceeded $ 73 a barrel.
The prediction comes at a time when inflation concerns are mounting and many commodities, such as copper, have already reached record levels, spurred by supply shortages as the economic recovery gathers pace.
Oil has fallen behind due to a slowdown in demand during the coronavirus pandemic and fears that demand may peak over the next decade. But predictions that prices will rise sharply over the next few years have gained momentum in recent weeks.
Jeremy Weir, executive chairman of Trafigura, one of the world’s largest independent oil traders, told the FT Commodities Global Summit on Tuesday that he was “concerned” about the lack of spending on new supplies because the world does not he wasn’t ready to make the leap to clean energy and full electrification.
“I actually think there is a chance that oil will hit those numbers,” he said at the top. “The problem with oil is not demand. . . the supply situation is quite worrying. We went from 15 years of reserves to 10 years. We have seen capital spending drop from five years ago from $ 400 billion per year to just $ 100 billion per year. So there is a concern on the supply side. . . which I think will probably drive up the prices.
Alex Sanna, Glencore’s largest oil trader, also said $ 100 oil looked more likely.
“If you reduce the supply without meeting your demand at the same time, that’s when you can get price dislocations,” Sanna said. “You are really just one or two events away from a major oil price spike. “
Oil has not traded above $ 100 a barrel since 2014, when an increase in supplies to the U.S. shale sector ended the last supercycle. At the turn of this century, oil prices rose from nearly $ 10 a barrel to over $ 100 in 2008, driven by growing demand from China. Prices, although volatile, averaged around $ 100 a barrel for the next six years.
Russell Hardy, managing director of Vitol, the world’s largest independent oil trader, said $ 100 worth of oil was a “possibility,” although he believes there should be enough capacity available, Opec and allies such as Russia still restricting supplies due to the pandemic.
“There are 5 million barrels of aftermarket production currently on the market,” said Hardy.
But Jeff Currie at Goldman Sachs, a big proponent of the oil rally over the past decade, has argued that commodities envision a new supercycle as government stimulus measures boost demand.
He believes demand for oil will rise because policymakers use spending on huge green infrastructure projects as stimulus to tackle inequality.
“We argue that every $ 2 trillion of green investment spent equals about 200,000 barrels per day of oil demand,” he said.
Hardy at Vitol said the trading house believed demand for oil would peak around 2030, but initially demand would not drop sharply at first, but would peak well above the 100 million barrels per day level. that she had achieved in 2019.
The key period for the risk of an oil supply gap is between 2025 and 2030, he said, and that due to growth in developing countries, it would take until 2040 for the global demand for oil is starting to drop rapidly.
“Oil demand is likely to continue to grow until 2030, obviously dominated by non-OECD and developing markets,” he said.
Marco Dunand, co-founder of Mercuria, said he expected oil demand to return to pre-pandemic levels and reach just over 100 million barrels per day by the end of the year, while Gunvor’s chairman Torbjörn Törnqvist agreed that $ 100 worth of oil could come back and that high prices were needed to spur investment in the industry.
Some of the biggest oil producers such as BP and Royal Dutch Shell have said their oil production will start to decline in the coming years as they shift their investments towards greener forms of energy under pressure from investors.
Equinor, Norway’s state-backed oil company, said on Tuesday it would spend 50% of its capital spending on renewable and low-carbon energy investments by 2030, but did not expect to see its oil production drop before that date.