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El Erian: Why does he not see a rise in oil to $ 100

Forecasts for a rise in crude to $ 100 a barrel ignore key questions about the future of oil demand, according to Mohamed El Erian, chief financial officer of Allianz and chairman of Gramercy Fund Management.

Both the international benchmark Brent and US crude have jumped above $ 80 a barrel in recent weeks as post-pandemic demand outstrips supply. In addition, rising gas prices have caused crises around the world, especially in Europe.

Speaking to CNBC’s Dan Murphy at the ADIPEX energy conference in Abu Dhabi, El Erian said he agreed with previous statements by Sultan Ahmed Al Jaber, chief executive of the Abu Dhabi state oil company, that “the world the energy crisis.

El Erian stressed that two events have taken place that were considered unlikely if not unthinkable until a year ago. First, that demand would soar and supply would not be able to follow through to meet needs, and second, that the planned energy transition would pose challenges as transitional fuels are not “sufficiently available”.

Although he noted that market participants had not predicted a rise in oil prices to $ 80 a barrel at the beginning of the year, he ruled out the possibility of oil prices climbing to $ 100 a barrel.

“If you focus only on supply, the price of oil could reach $ 100, because there has been underinvestment in the industry as a whole and demand will remain strong,” El Erian said.

“But if you look at what is happening in demand, then some questions arise. Demand is strong today, but it will remain strong in six months? There are really important questions about the collapse of demand – people are buying less because of high prices. – and as to whether the policy becomes restrictive or not “, he added.
OPEC and its allies agreed earlier this month to maintain current production levels, choosing not to increase production under pressure from rising oil prices to perennial highs and calls from Washington for market normalization measures. .

Finally, El Erian argued that while the prospect of further sharp increases in oil prices does pose risks to the global economic recovery, they are low on the risk list, adding that the most important is “a miscalculation of inflation.” by central banks.

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