Oil prices: when will it hit $100 a barrel? 

After weeks of rising prices and “multiple market rallies”, the price of oil has taken “a breather”. Prices have eased slightly amid the resumption of indirect talks between the US and Iran, which could “revive the 2015 nuclear deal”, City A.M. reported.

On the first day of trading this week, the price of Brent – the international crude oil benchmark – hit a seven-year high of $94 per barrel yesterday – and today is down 0.53% to $92.16, according to OilPrice.com. Meanwhile, WTI Crude is down 0.40% to $90.92.

Oil prices are “roaring” and have jumped more than 20% so far this year, said Bret Kenwell on TheStreet.com. Crude prices are “easily outpacing” the S&P 500 and other major US stock markets – and “in a world where inflation continues to climb, so too does oil”. With the economy continuing to reopen, this has acted as a “catalyst” and “bodes well” for the commodity.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Will optimism be short-lived?

Both oil contracts have “touched recent seven-year tops”, Reuters said, and have been supported by “strong global demand”, “ongoing tensions” between the Ukraine and Russia and potential “supply disruptions” due to cold weather conditions in the US.

Reviving a nuclear agreement between the US and Iran could lead to the removal of sanctions on Iranian oil sales and increase global supplies. But while there is “optimism” over the US-Iran talks, oil’s price weakness will “likely be short-lived as the oil market remains in a supply deficit”.

“With crude demand expected to steadily improve throughout the rest of the year, the oil market is completely being driven by both supply side and geopolitical risks,” said OANDA analyst Edward Moya.

The outlook for 2022 and 2023

Traders were on “high alert” for supply glitches after oil prices hit the seven-year peak, the FT reported. Traders “rushed to lock in supply” on expectations of “resurgent demand, patchy production and an unstable geopolitical landscape”. “People are just on high alert,” said Amrita Sen of Energy Aspects. “Anything that could remotely impact supply to downside or demand to the upside, the market is reacting.”

Last month, analysts from Goldman Sachs predicted that Brent will reach $100 a barrel in the third quarter of 2022 and average at $96 a barrel this year. It forecasts that oil prices will rise to $105 in 2023.

On the back of a “triple deficit” for the commodity – low inventories, low spare capacity, and low investment – Morgan Stanley raised its outlook, Markets Insider reported. The bank also predicted that Brent crude would jump to $100 per barrel by the third quarter of this year – up from its $90 per barrel forecast published on January 6.