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Analysis

Could crude oil spike to $100 a barrel?

old image of oil drilling in the desert

Crude oil could hit $100 a barrel with the market “very, very tight” and because of a lack of investment by energy companies, commentators are forecasting.

Jeremy Weir, chief executive officer and chairman of energy trading giant Trafigura Group, told The Financial Times’ Commodities Asia Summit on Tuesday that additional supply is needed but it is uncertain if it will arrive.

Trafigura is the world’s second-biggest independent oil trader. The company’s chief economist said in June that $100 oil is a possibility in 12 to 18 months.

Italy’s Eni said oil prices may rise to $100 a barrel due to a lack of investment among energy companies, though only for a short time.

“Maybe it can reach that,” chief executive officer Claudio Descalzi said to Bloomberg Television on Monday. “But not for a long time. When the price is that high,” it would lead to consumers cutting back on energy use.

Crude has soared around 60% to more than $80 a barrel this year as economies recover from the coronavirus pandemic and the OPEC+ group of major producers restricts supply, according to Bloomberg. Russia’s president Vladimir Putin said last month that $100-oil is “quite possible,” while Bank of America thinks it might even reach $120 a barrel by June.

However, the International Energy Agency said the tightness in global oil markets is starting to ease.

While demand growth remains robust, supply is catching up, the IEA forecast in its latest monthly report.

Global oil output increased by 1.4 million barrels a day last month, and will add as much again over November and December, the agency said.

The IEA bolstered forecasts for US production in the fourth quarter by 300,000 barrels a day, and for next year by 200,000 a day. American output will climb by 1.1 million barrels a day in 2022, accounting for 60% of the growth outside the OPEC+ coalition.

US President Joe Biden is facing increased pressure from members of his own party to release oil from the Strategic Petroleum Reserve to quell rising gasoline prices. 

Some analysts feel that the anticipated SPR release has been largely priced into the market and it will gradually drift higher.

OPEC+ producers, meanwhile, have said the market will soon become over supplied and are resisting calls from consuming nations to restore production faster. Russia is suggesting there might even be excess supply from early next year. 

WTI price starts to retreat since end of October, the pattern shows similar moves back to from early July to late August when the crude oil price fell more than 20% before it bounced back.

1. Signs of continuous bearish

  •  WTI prices are moving below the 20-day MA for 5-straight days
  •  A shooting star pattern in the candle stick the previous day
  • MACD is in downtrend with a previous negative crossover and a potential crossing of the Zero Line

2. The imminent support is at 78.50 around the 50-day MA

The next support is at 73.91, which is around 100-day MA and Fibonacci 50.0% retracement

- Technical analysis provided by CMC Markets APAC analyst Tina Teng


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