Oil may hit $100 but volatility will grow, Say Energy CEOs

Oil prices rising

Benchmark oil prices could hit $100 a barrel and price volatility could also grow due to lower investments and the energy transition, the heads of top energy companies said on Tuesday.

“There is quite a chance to reach $100 but we could see again in the coming years some lows as we have been accustomed to volatility,” TotalEnergies Chief Executive Patrick Pouyanne said at the Qatar Economic Forum.

Crude prices climbed on Tuesday to a more than two-year high above $75 a barrel.

“We’re probably going to see both $50 and $100 oil, don’t ask me about sequence though,” Royal Dutch Shell CEO Ben van Beurden told the event.

Exxon Mobil CEO Darren Wood said, “Coming out of the pandemic and the lack of investment in our industry, I think it’s going to exacerbate the supply and demand tightness as the economy’s pick back up again.”

Wood added: “And then with time we’ll see supply pickup and rebalance so we’ll see both of those but in the shorter term probably higher prices.”

Bank of America predicts similar rise

Oil may surge to $100 a barrel next year as travel demand rebounds, Bank of America Corp. said, the strongest call yet among major forecasters for a return to triple digits.

Global oil consumption will continue to outstrip supply in 2022 as the economic recovery from the pandemic boosts fuel consumption, while investment in new production is crimped by environmental concerns, the bank said in a report.

“There is plenty of pent-up oil demand ready to be unleashed,” said Francisco Blanch, the bank’s New York-based head of commodities research. Brent futures traded near $74 a barrel on Monday.

While other market-watchers, from trading house Trafigura Group to Goldman Sachs Group Inc., have already said that oil could reach $100 again in the right conditions, the prediction from Bank of America is the firmest to date.

If crude does return to triple digits, it will be the first time since 2014, before a flood of North American shale oil sent the market into a slump from which it has never fully recovered.

The increasingly bullish outlook for oil is adding to pressure on the OPEC+ coalition led by Saudi Arabia and Russia, which meets next week to consider reviving some more of the production it cut during the pandemic.

While Riyadh has signaled it prefers to move cautiously, an ever-tighter world market could compel the alliance to open the taps a little. Prices have been stoked this month as fellow OPEC member Iran fails to clinch an agreement to relieve U.S. sanctions on its petroleum exports.

According to Bank of America, the immediate prospects for the OPEC+ alliance are bright.

Oil consumption will be bolstered next year as mass transit struggles to keep pace with extra travel demand, prompting passengers to make greater use of private cars.

Even the ongoing popularity of remote working won’t dent fuel consumption as much as expected, as home-workers use cars during the day to run personal errands, the bank said.

“Work-from-home means ‘work-from-car’ in many cases,” Blanch said.

At the same time, the bank expects that new oil supplies will remain constrained. Shareholders will pressure major companies to invest in renewable energy, or push shale drillers to return cash rather than spend on new drilling.

Still, expectations for a tight market in 2022 are far from unanimous. A report from the International Energy Agency earlier this month showed that half of the projected increase in demand can be met by recovering output outside OPEC, predominantly from the U.S.

That would leave the Organization of Petroleum Exporting Countries and its partners with significant quantities of idle output — and even more if Iran can strike a nuclear accord with the U.S. by then.

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