The knee-jerk reaction to the surprise 1.16 million barrels per day (bpd) output cut by OPEC+ oil-producing countries saw Brent crude oil prices climb 6.4 percent to over $85 a barrel intraday on Monday.
On the back of this recent hike, analysts told market daily Business Standard that crude prices could stay firm and inch towards $100 a barrel as the year progresses if OPEC+ continues to cut production amid strong demand.
According to G Chokkalingam, founder and head of research at Equinomics Research, the cut is a setback for the global economy, and India especially, amid fears that the monsoon may be affected by the El Niño phenomenon.
He noted that India and China were likely to see a pickup in economic growth. However, the significant oil output cut will lead to a rise in Brent oil close to $90 a barrel in the next few months and it could breach the $100 mark by 2023-end.
"It can even hit $110 a barrel by 2023-end unless the US and Europe continue with hikes in rates throughout 2023 and pull down their economies into recession or near contraction. Any rise in Brent oil prices beyond $120 a barrel would pull down global equities significantly," he cautioned.
Nigel Green, chief executive officer of deVere Group, a global consulting firm also believes that $100 a barrel could become a reality.
“The production cuts could see oil prices close to $100 a barrel due to demand from a reopening China and as Russia has slashed production due to sanctions from the West. The dramatic cut will only add to pressing global inflationary squeezes,” he forecasted.
Brent crude prices had dropped to around $72 a barrel in mid-March as the banking crisis in the US and Europe triggered fears of a contagion and economic slowdown globally. Since then, prices have risen around 18 percent to just under $85 a barrel now, informed the report.
Goldman Sachs also lowered their Opec+ production forecast by 1.1 million bpd till the end of December, and raise Brent price forecasts by $5 a barrel to $95 a barrel for December.
Vandana Hari, founder, Vanda Insights, too, expects oil prices to climb as the year progresses.
“The rise in oil prices from here on will be very scenario-driven. For instance, if Chinese demand rebounds by 700,000 barrels per day or more year-on-year for 2023 and, say, consumption is mostly flat in Europe and the US and Opec+ maintain its cuts, crude could move towards $90," she said.