Saudi Arabia's supply cuts could push oil prices to $100 a barrel by May, economists say. Rising geopolitical tensions and an Opec output curb extension mean oil prices will exceed $100 for the first time since summer 2022, say economists.
SEB bank chief commodities economist Bjarne Schieldrop anticipates Brent crude to reach this level in May or June. Mr. Schieldrop said, “Towards the end of Q2, I think it's natural to assume that we'll see the price move towards the $100 mark.”
Brent crude has risen 20% from January to almost $91 per barrel. This followed Opec's March announcement to extend supply restrictions of 2.2 million barrels per day for three months.
“It’s a totally artificial price controlled by Opec,” Mr. Schieldrop said of a $100 oil price spike unless Russia and Saudi Arabia extend supply restrictions. What Opec does in Q3 is key.”
As Mohammed bin Salman and Vladimir Putin desire higher oil prices for revenue, Opec has slashed. Investec commodities director Callum Macpherson predicts oil prices will reach $100 by June if they continue to grow since December.
Analysts say Middle East tensions will determine how long oil prices stay high. Last week, Goldman Sachs head of oil research Daan Struyven cautioned that protracted Opec production cutbacks “could send Brent above $100 for some time” in a client note.
Saxo Bank analyst Ole Hansen said we might hit this threshold “within days” if Iran and Israel fight and disrupt oil supplies. Since petrol and energy prices will rise, a sharp rise in oil prices might keep inflation high.
HSBC senior economist Chris Hare said a sustained 10% oil price increase normally raises UK inflation by 0.1–0.2%. This would be an issue for the services sector, as energy-intensive sectors like transport, hotels, and restaurants have fallen, cooling inflation, according to Capital Economics UK economist Ashley Webb.
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