(Bloomberg) -- While oil’s dizzying collapse is still fresh for many traders, rumblings are starting to emerge that by the end of next year prices could once again top $100 a barrel.Azerbaijan’s Socar Trading SA predicts global benchmark Brent could hit triple digits in the next 18 to 24 months, and Bank of America sees potential spikes above $100 over the next few years on improving fundamentals and global stimulus. Speculators are also getting in on the action, increasing bets in the options market that oil will reach the vaunted level by December 2022.The views are ultra bullish, but they highlight increased confidence in the oil market after Brent rallied more than 200% after hitting an 18-year low during the pandemic. Demand has bounced back in key Asian markets, while OPEC+ is withholding barrels and a lack of investment is keeping shale supplies at bay. Goldman Sachs Group Inc. this week lifted its third-quarter forecast by $10 to $75 a barrel.Option bets on oil prices rising above $100 for the December 2022 Brent contract have jumped in recent days, with open interest on the calls rising from 500 to 3,950 in the past week. Front-month futures in London rose 2.6% on Wednesday to close at $67.04, the highest since January 2020.The $100 mark occupies a special place in the mind of many traders, as oil hovered around that level for several years in the early part of last decade as strong demand from emerging markets enticed drillers into ever more expensive locales, from deep ocean beds to Canada’s remote tar sands.That era ended in 2014, when U.S. shale firms proved they could pump massive amounts at far lower costs. But while the vaunted price level has been out of the market’s reach since then, it hasn’t been out of traders’ minds. It was just a little more than two years ago that major trading houses made $100 projections that ended up falling far short.Forecasts for $100 are far from the current consensus. The median analyst forecast compiled by Bloomberg has Brent staying below $65 a barrel through 2025. And there are plenty of reasons to be skeptical of such a resurgence. For one, the OPEC cuts that have limited supply are artificial, and the cartel has enough spare capacity to meet any shortfall should demand rocket following a worldwide recovery from the pandemic, according to Bloomberg Intelligence.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Chinese national banks and Australia's Macquarie Group are quietly filling some of the multi-billion-dollar hole in Asian oil financing after the withdrawal of traditional European lenders, hurt by a raft of defaults and fraud allegations. Established financiers still taking on oil transactions, such as France's BNP Paribas and Singapore's OCBC, have raised compliance standards and are shying away from higher-risk small traders and refiners, according to interviews with over a dozen trading and banking executives. Beijing-controlled Bank of China, ICBC Standard and Agricultural Bank of China are among the few institutions that are expanding credit in the sector, mostly as customers activate dormant lending facilities set up previously but left unused as they were viewed as too expensive or restrictive.
(Bloomberg) -- A planned overhaul of how the world’s most important benchmark crude price is calculated has caused a surge in trading of swaps used to hedge North Sea oil prices.From next summer, the benchmark Dated Brent price, a basis for two-thirds of all physical crude transactions worldwide, will no longer be based exclusively on the trading of barrels pumped from North Sea. Instead, supplies from Texas will also be eligible for inclusion to set the measure, publisher S&P Global Platts said Monday.The shift, which alters the nature of what Brent crude will be, has triggered a surge in trading of derivatives called Dated-to-Frontline swaps for 2022 that producers can use to hedge physical cargo sales, according to several people directly involved in the markets. Some participants are uncertain about how exchanges will accommodate the changes, they said. Prices of the contracts have spiked alongside the trading.Until now, the Brent benchmark and associated derivatives have been based on the trading of barrels where they are loaded, known in market terminology as a free-on-board price. Adding U.S. crude means the market will be priced at the point of delivery, which usually includes shipping costs.It will also require a rewriting of the contracts that have underpinned trading in the Brent markets for decades.Late last year, ICE announced a consultation on Platts’s plans, which closed in January. It is still assessing the impact of the change on its markets, according to a person familiar with the matter.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.