Yahoo Finance Oil prices hit $80 a barrel - but could $100 oil be on the cards?
Oil prices have surged to $80 (£61) a barrel as Hurricane Florence nears the US east coast and could climb to multi-year highs by the end of the week, analysts have suggested.
The looming threat of supply disruption has already pushed oil prices up by almost 3pc in two days, but a tightening market could drive prices higher still before the end of the year.
Gordon Gray, of HSBC, warned the market not to rule out a return to $100 a barrel, saying the multi-year price spike is “not out of the question”.
The bank lifted its long-term price forecast for Brent crude for the first time in 15 months due to a slowdown in supply from the world’s largest oil producers.
“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,” he said.
The Organisation of Petroleum Exporting Countries has kept a tight rein on supply for the past two years to help erode the heavy glut that helped drag prices to 12-year lows in 2016.
The self-imposed supply cuts have been compounded by involuntary declines in output from some of the cartel’s members.
A collapse in Venezuelan production has continued as the country’s economic crisis deepens, while a severe outage in Libya and a steady decline in supply from Angola has further tightened oil flows into the market, HSBC said.
Meanwhile looming US sanctions on Iran could strip millions of barrels of oil from the market when they take effect on Nov 4.
“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,” Mr Gray said.
Opec’s official monthly report revealed on Wednesday that the cartel's production rose by 278,000 barrels a day in August compared to the month before. The increase was driven by higher output in Libya, Iraq and Nigeria, it said.
However, demand for the organisation's own crude oil will be almost one million barrels a day more than the level produced in August over the rest of the year.
In 2018, demand for Opec crude is expected at 32.91 million barrels a day, with demand for the second half to average 33.50 million b/d, the monthly market report showed.
The forecasts for next year are less certain as murky geopolitical maneuverings cloud predictions for global economic growth.
“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.
