There is no justification for reaching $ 100 – OCBC

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WTI and Brent are above $ 82 and $ 84 a barrel, respectively. How much higher can oil go? Howie Lee, an economist at OCBC Bank, continues to be very skeptical of a rise in oil to $ 100.

“Many are looking at the oil price chart and pointing to the lack of any notable resistance levels from here at $ 100 to justify reaching that price. But doing so shows a lack of understanding of the structure of the oil market. The era of the oil market. $ 100 oil was before the US shale boom and stocks were much tighter than they are now. “

“Despite the current stock market tension, stocks are still not as tight as they were in the pre-shale era, therefore it seems ambitious to suggest prices revert to pre-shale days.”

“If the implicit consumption of gasoline increases from 9,750 kbpd to 10,500 kbpd on a sustained basis (+ 8%), or commercial oil inventories fall by 70 million barrels to 350 million barrels (-17%), then that $ 100 theory may have a chance But these are huge hurdles that I’m not particularly optimistic about. On that lack of optimism, it appears that current prices are the highest the oil market can go for – Brent at $ 85, WTI at $ 80 – with the potential for a slight excess of $ 3 or $ 5 a barrel. . “

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