Oil’s chances of hitting $100 in the near future aren’t that far off if current trends in the oil markets continue, analysts at RBC Capital Markets said in a note to investors Thursday.
“The idea of $100/bbl has gone from unthinkable just a few months ago to within striking (or hyped) distance today,” RBC Capital Markets’ Helima Croft and Michael Tran wrote in their Thursday note, according to Yahoo Finance, adding, “The idea of $100/bbl remains far from a baseline scenario for us, but we have learned to respect that this oil market has become as much a momentum market as it is a fundamentals market as we think of near-term prices. It often overshoots and overcorrects.”
RBC expects tight oil markets for the remainder of the year as Saudi Arabia, Russia and the rest of OPEC + show persistence in cutting oil production.
For their base case, RBC expects Brent to average $91 in the fourth quarter of 2023, with WTI not too far behind at $86.50. Currently, WTI crude is trading down for the day. However, it is still above that market at $87.02. Brent crude is currently trading at $90.05 per barrel. The announcement by Saudi Arabia and Russia to extend their current production cut targets through the end of the year sent oil prices soaring earlier in the week. Additional upward pressure on crude oil came from API and EIA figures, which indicated that U.S. crude and product inventories fell for another week. Meanwhile, OPEC oil production appears to be declining.
Saudi Arabia’s persistence in cutting crude production this round is a testament to the needs of the oil-rich nation, which likely needs barrel prices at $90 or higher to support its budget.