Oil prices may hit $100/bbl as global market tightens: analysts

Brent crude prices will reach $100 a barrel for the first time since 2014 as OPEC and its allies strive to compensate for US sanctions on Iran’s exports, Bloomberg reported, citing major oil trading houses.

The benchmark crude price crossed $80 on Monday, hitting a four-year high, despite US President Donald Trump's calling on OPEC to take measures to cool down the market last Friday.

“The market does not have the supply response for a potential disappearance of 2 million barrels a day in the fourth quarter,” Daniel Jaeggi, co-founder, Mercuria Energy Group Ltd, said at the S&P Global Platts Asia Pacific Petroleum Conference.

“In my view, that makes it conceivable to see a price spike north of $100 a barrel.”

Trafigura Group co-head of oil trading Ben Luckock expected price to hit $90 by Christmas and $100 in early 2019.

"The market estimated a cut of about 300,000 to 700,000 barrels a day, when Trump in May announced plans to reimpose sanctions on Iran’s oil exports."

However, the consensus has now moved to as much as 1.5 million barrels daily as the US is “incredibly serious” about its measures, he added.

Meanwhile, Francisco Blanch, head of commodities research at Bank of America Corp, said in a client note that signals from OPEC mean "the likelihood of an oil spike and crash scenario akin to the one observed in 2008 has increased." It expects oil at around $80 a barrel next year.

Instead Citigroup Inc. sees crude at that level in Q4 2018, but sees risks that it will go higher.

“Balances are precarious and the lack of spare capacity could see crude pricing well above $90 or even $100, should all of the potential risk in the market materialize,” the bank's analysts said in a note.