· According to one of the world’s largest commodity traders, oil prices will struggle to break back above $100 this year.
· Since climbing above $130 a barrel this spring, oil prices have fallen consistently, with Brent slumping to $85 recently.
· As central banks aggressively hike interest rates and the Covid factor, much would have to change to send oil prices to $100.
Slowing economies and interest rate hikes are set to keep investors and traders off risk assets such as crude oil, which could mean that oil prices may not exceed $100 per barrel again this year, according to one of the world’s largest commodities traders, Trafigura.
“Given the macro headwinds, I think generally prices will struggle ... despite imminent sanctions,” Saad Rahim, Chief Economist for Trafigura, told Reuters on the sidelines of APPEC petroleum conference in Singapore.
Oil prices have recently slumped to $85 a barrel Brent, a level last seen in January this year before the war. In the spring, oil hit multi-year highs of over $130 a barrel.
An aversion to risk assets amid rising interest rates, mounting evidence of slowing economies, and further aggressive rate hikes that could dampen economic growth—and possibly oil demand growth—have been weighing on the oil market during the third quarter.
“So far the market has been more redirection than reduction, but I think it is unclear from here,” Trafigura’s Rahim told Reuters.
Next year, oil prices could rebound to above $100 per barrel if it lifts Covid-related mobility restrictions and the Fed slows or pauses rate hikes to try to boost growth, the economist told Reuters.
Despite the current sub-$90 oil, OPEC+ hasn’t responded yet, because they are likely looking at the overall market picture, Rahim said, adding that “actually demand today is still relatively holding up.”