Price Of Oil Heads Back To $100 A Barrel

Lisa Smith, BA (Hons), CeFA
By

Oil prices are slowly floating up and a return to the $100 barrel could be on the cards within a few weeks.

The price of oil slumped from around $108 a barrel in 2014 to a low of $30 in 2016 as the world economy was gripped in recession.

Since then, the trend has been a slow but sure increase to the current price of $80.

Analysts say a threat of oil supply disruption is helping to buoy the price and HSBC Bank is warning a surge back to the $100 mark is not out of the question.

“While we aren’t explicitly forecasting Brent to rise to $100 a barrel we see real risks of this happening. The fact that much higher supply is already needed from the likes of Saudi Arabia – and the low levels of spare capacity remaining – leave the global system highly vulnerable to any further significant outage,” said spokesman Gordon Gray.

OPEC throttles global production

The rising price owes much to warring factions within the Organisation of Petroleum Exporting Countries (OPEC) burying their grievances and controlling oil supply, even though several have had to impose a throttle on production that harmed their economies.

Politics in Venezuela, Libya and Angola have seen the flows from these producers slow to a trickle and US sanctions again Iran due to start in November will see millions of barrels in production lost.

“The last time sanctions were imposed; Iranian exports fell by around 1.2 million barrels of oil a day. While the outcome this time round is highly uncertain, we think a cut of at least this magnitude could be seen again,” Gray said.

Unsettled market may last months

Despite a cap on production, the limit seems flexible as OPEC is raising production by more than 250,000 barrels a day, but demand is still at least a million barrels a day more than is coming out of the ground.

The world guzzles around 33 million barrels of oil a day on average.

“Going forward, economic uncertainty, and hence questions surrounding global oil demand, coupled with geopolitical tensions, will need to be factored into maintaining a balanced market in the months to come,” OPEC said.

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