3 reasons why global oil price may never reach the $100 mark again

There is a growing consensus in markets that global oil prices could reach the triple-digit mark by next year on the back of booming global demand as more economies open up after the ongoing Covid vaccinations.

Noted commodity strategist Francisco Blanch of BofA Securities last month made a case for oil to reach $100 per barrel, as demand booms and supply fails to catch up. In the options market, traders and hedge funds have been piling up bets for $100 a barrel oil price by the end of 2022.

Global oil prices have rallied significantly over the past nine months, moving from less than $30 a barrel to closer to $75 on the back of re-opening of economies like the US, the UK and China.

Oil prices at $100 could be bad news for the Indian economy and its fledgling recovery. Most investors and economists will shudder with the memories of the early days of the past decade, when oil prices had moved to triple digits and thrown the Indian economy into a tailspin, culminating in the humiliation of being tagged the ‘Fragile Five’ of the global economy.

Hitesh Jain of YES Securities says a repeat of the oil market super-cycle of the kind seen in 2004-2014 is unlikely. In a note, Jain argued that investors should take the chorus of ‘$100 oil’ with a ‘grain of salt’.

“Brent value should peak out around $80 a barrel as Opec supply will inevitably move higher, given the lure of higher price realisation and record high spare capacity,” Jain said.