Source: Zhitong Finance Author: Wei Haoming
Bank of America analysts said there is room for oil prices to rise.
Bank of America analysts said that oil prices still have room to rise, but they may peak below $100 per barrel. Francisco Blanch, head of global commodities at Bank of America, said on Wednesday: “We think oil prices will peak at around $95 per barrel after entering summer. Gasoline and diesel prices will also continue to rise. As a result, we are going to see a strong rise in the fuel market.”
Crude oil prices have risen in recent months due to OPEC+ production cuts, attacks on Russian refineries, and escalating tension in the Middle East, including the suspension of goods in the Red Sea region. Blanch said the geopolitical tension actually showed increased demand. “Boats around the world are having to take longer routes,” Blanch said. They can't walk along the Red Sea. Also, they have to speed up because of the longer trips.”
The steady rise in oil prices has prompted speculation that if current market conditions continue, oil prices will move towards $100 per barrel. On Wednesday, WTI crude futures hovered above $86 per barrel, and Brent crude futures traded around $90 per barrel.
However, Blanch and other analysts believe that if the price is too high, OPEC will step in with idle capacity to prevent loss of market share. Rebecca Babin, a senior US energy trader at CIBC Private Wealth, also said on Tuesday: “OPEC will see this and then say... let me act early to restore part of production, offset the sharp rise in oil prices, and maintain control over the market. I think this will dampen the rise to $100 that some people are talking about.”
Babin added that in light of recent price increases, she is watching for any signs of tight demand. She said, “You can't just see a wave of explosive growth and think demand will be completely inelastic. The trigger was $90 a barrel of Brent crude, and we're starting to see some demand disrupted.”
Furthermore, according to the latest data released by the US Energy Information Administration (EIA) on Wednesday, crude oil inventories increased by 5.8 million barrels last week, far higher than the expected 800,000 barrels.
However, analysts expect that the recent rise in crude oil prices and strong tourism demand will continue to push up gasoline prices until summer. Fuel prices, which usually rise in spring, were one of the main drivers for the acceleration of inflation again in March. According to the American Automobile Association data, the national average gasoline price in the US was $3.62 on Wednesday, up $0.23 from a month earlier.
