Wed. Oct 4th, 2023
    Oil Prices Expected to Reach $100 Briefly, but Retreat by Year-End

    According to Wall Street analyst Ed Morse and his team at Citigroup, oil prices could briefly reach $100 per barrel due to output cuts and geopolitical tensions. However, they believe prices will retreat by the end of the year.

    Morse highlighted the efforts of Saudi Arabia and Russia to limit oil production, which has supported higher prices in the near term. However, he stated that sustained prices at $90 are unlikely given the faster growth of supply compared to demand, excluding Saudi Arabia and Russia.

    Although oil prices have been on an upward trend in recent months, with West Texas Intermediate (WTI) and Brent crude futures both rising significantly, Citigroup analysts expect prices to average $84 in the fourth quarter of 2023 and move to the low $70s in 2024. This projection is based on the increasing production among non-OPEC+ members such as the United States, Brazil, Canada, and Guyana, as well as the growth in exports from Venezuela and Iran.

    The recent rally in oil prices has led RBC Capital Markets to suggest the possibility of prices reaching $100 per barrel. However, analysts Michael Tran and Helima Croft cautioned that this scenario is now within reach due to market momentum.

    The rise in oil prices has also had an impact on refined oil products. Gas prices in the United States reached new highs in 2023, reaching a national average of $3.88 per gallon, while diesel prices rose to $4.57 per gallon, affecting transportation costs for goods via trucks.

    Several airlines, including United Airlines, Delta, and American, have also expressed concerns about lower profits due to higher fuel costs. These rising energy costs are causing worries about negative effects on the broader economy, particularly at a time when the Federal Reserve is aiming to curb inflation through interest rate hikes.

    In summary, while oil prices may briefly reach $100 per barrel, the long-term outlook suggests a retreat by the end of the year. Factors such as increasing production among non-OPEC+ members and the potential reversal of production cuts by Saudi Arabia indicate that supply dynamics will likely limit the sustained increase in oil prices.

    – Citigroup Global Commodities, Wall Street Journal
    – RBC Capital Markets
    – AAA
    – Yahoo Finance