Analysts have warned that oil prices are expected to reach $100 a barrel by May as Saudi Arabia extends supply cuts.
Economists predict oil prices will rise above $100 for the first time since summer 2022 as geopolitical tensions rise and the OPEC cartel extends production cuts.
Bjarne Schildrup, chief commodity analyst at SEB Bank, said he expected global benchmark Brent crude oil prices to reach this mark in May or June.
“I think it’s natural to think that toward the end of the second quarter, prices will move towards the $100 level,” Seildrop said.
Brent crude oil prices have already risen about 20% since the beginning of the year, to more than $91 per barrel.
This comes after OPEC, the Saudi-led oil production cartel, announced in March that it would extend supply cuts of 2.2 million barrels per day for another three months.
Mr Sealdrop said the rise in oil prices to $100 would be temporary unless Russia and Saudi Arabia opt for a long-term extension of supply cuts, adding: “This is a total failure controlled by OPEC. It’s an artificial price.” The big question is what OPEC will do in the third quarter. ”
OPEC cut production as Mohammed bin Salman and Vladimir Putin seek to raise oil prices in a bid to boost revenue.
Callum McPherson, head of commodities at Investec, believes oil prices could reach $100 by June if they continue to rise on the same trajectory since December.
But analysts said how long oil prices would remain high depended on escalating tensions in the Middle East.
Daan Struiven, head of oil research at Goldman Sachs, warned in a note to clients last week that Brent “could remain above $100 for some time” if OPEC supply cuts are extended.
Saxo Bank analyst Ole Hansen said this threshold could be reached “within a few days” if Iran and Israel were involved in a conflict that disrupted local oil supplies.
Significant increases in oil prices raise the risk that inflation will remain high for an extended period of time as the cost of gasoline and energy rises.
Chris Hare, senior economist at HSBC, said a sustained 10% rise in oil prices would typically increase UK inflation by 0.1 to 0.2 percentage points.
Ashley Webb, UK economist at Capital Economics, said this would be particularly problematic for the services sector, where declines in the most energy-intensive sectors such as transport, hotels and restaurants have caused inflation to cool. He said there was.
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