Oil prices have rallied this week with Brent (BZ=F) and US West Texas Intermediate (CL=F) trading around $77 (£62.28) and $73 a barrel respectively, buoyed by the latest US stockpile data and a crude output warning from Saudi Arabia.
The last time crude surged above $100 a barrel was in February 2022, as a result of Russia’s invasion of Ukraine, which disrupted energy markets. However, a number of analysts believe there are reasons to anticipate another spike in prices.
What’s boosting oil prices?
Latest industry data showed that US crude oil and fuel inventories fell about 6.8 million barrels last week, according to market sources citing American Petroleum Institute (API) figures. Gasoline inventories, meanwhile, dropped about 6.4 million, according to Reuters.
The supply concerns boosted oil prices, which gained further support following suggestions of more crude output cuts from OPEC+.
It is after Saudi Energy Minister, Prince Abdulaziz bin Salman told short-sellers this week to watch out during his most recent comments on the market, which comes just before the next OPEC+ meeting on 4 June in Vienna.
“I keep advising them that they will be ouching, they did ouch in April,” bin Salman said at the Qatar Economic Forum in Doha.
Could oil reach $100 a barrel?
If OPEC+ does opt to cut crude oil output again, as it did in April, it will add tightness in the oil market and could lift oil prices higher, which could be further exacerbated by the large number of speculative short bets against crude.
“Coming over the weekend again, traders may not be in quite the same mood to test the group's resolve as the market gapped significantly higher last time. That said, a failure to follow through could see prices move sharply in the other direction,” Craig Erlam, senior market analyst at OANDA, said.
Meanwhile, Piero Cingari, independent macro analyst, said he was of the view that another OPEC cut will push crude to at least $90 a barrel, also noting how April created "a massive short squeeze".
What’s capping oil prices?
Cingari further highlighted factors that are limiting oil prices, including global recession fears, that could slow demand, as well as more interest rate hikes from central banks.
Meanwhile, Osama Rizvi, an oil analyst at Primary vision, said there was no chance that oil prices would trace their way back to triple digits.
“The global economy is positioned in a very perilous position. Manufacturing and industrial activity data from China was disappointing recently. Similarly industrial electricity supply and ISM Manufacturing PMIs from the US are showing low activity and contraction.”