Oil prices could rally to $100 a barrel if Middle East tensions ‘really kick off,’ analyst says

CNBC

  • “I don’t think its unfeasible to see triple-digit oil prices at some point this year if things really kick off in the Middle East,” Anish Kapadia, founder and managing director of Akap Energy, told CNBC’s “Street Signs” on Friday.
  • Both benchmarks were on track to post their biggest weekly gain in more than eight months on Friday.
  • World leaders continued to mull over military action on Friday, in response to a suspected chemical attack in Syria over the weekend.

What you see is a shift in the oil market, says energy expert

What you see is a shift in the oil market, says energy expert  

Oil prices could soon skyrocket to more than $100 a barrel amid escalating tensions in the Middle East, one oil analyst told CNBC Friday.

Crude futures surged to highs not seen since December 2014 earlier in the week, underpinned by greater geopolitical uncertainty in Syria and elevated concerns over the prospect of imminent military action by Western powers.

“I don’t think its unfeasible to see triple-digit oil prices at some point this year if things really kick off in the Middle East,” Anish Kapadia, founder and managing director of Akap Energy, told CNBC’s “Street Signs” on Friday.

A worker prepares to lift drills by pulley in the Permian basin outside of Midland, Texas.

Brittany Sowacke | Bloomberg | Getty Images
A worker prepares to lift drills by pulley in the Permian basin outside of Midland, Texas.

He added market participants had been “laughed out the room” when they projected crude futures to reach either $60 or $70 a barrel six months ago. But heightened tensions in the Middle East had since brought about the prospect of oil prices soaring to more than $100 a barrel later this year, he added.

Geopolitical premium ‘alive and well’

Both benchmarks were on track to post their biggest weekly gain in more than eight months on Friday, shortly after President Donald Trump‘s comments about potential missile strikes and reports of dwindling global oil stocks.

Brent crude was trading at $72.26 during lunchtime deals on Friday, up around 0.3 percent, while WTI traded at $67.35, approximately 0.4 percent higher. Both benchmarks have gained about $5 since the start of the week.

An uptick in oil prices followed incendiary comments from Trump on Wednesday. The U.S. president tweeted missiles “will be coming,” in response to a suspected chemical attack in Syria over the weekend. He has since sought to dial back such explosive rhetoric, raising the prospect that an attack on Syria may not be as imminent as it first appeared.

Nonetheless, world leaders continued to mull over military action in the war-torn country on Friday.

President Donald Trump

Getty Images
President Donald Trump

“Trump’s will-he-or-won’t-he antics are here to stay and will, therefore, ensure that the geopolitical risk premium remains alive and well,” Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note Friday.

He added oil prices were likely to continue to extend their recent gains in the near term.

However, the International Energy Agency (IEA) said Friday it “remained to be seen” whether recently elevated oil prices could be sustained.

In the Paris-based organization’s latest monthly report, the group left its forecast for oil demand unchanged at 99.3 million barrels per day (bpd) in 2018. The IEA’s outlook for supply also remained the same, as it projected non-OPEC growth to reach 1.8 million bpd this year.

Oil prices near 2014 highs over warnings of western air strikes against Syria

CNBC

  • Oil prices edged higher on Wednesday, adding to steep gains in the previous session.
  • Markets eyed an escalation of Middle East tensions after Europe’s air traffic control agency warned of possible air strikes on Syria in the next 72 hours.

A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Nick Oxford | Reuters
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Oil prices edged higher on Wednesday, adding to steep gains in the previous session, as markets eyed an escalation of Middle East tensions after Europe’s air traffic control agency warned of possible air strikes on Syria in the next 72 hours.

Brent crude futures rose to $71.09 per barrel at 0104 GMT, up 7 cents from their last close. Brent surged more than 3 percent on Tuesday to hit its highest level since late 2014, at $71.34 a barrel.

U.S. WTI crude futures were at $65.63 a barrel, up 12 from their last settlement.

The United States and its allies are considering a strike against Syrian President Bashar al-Assad’s forces following a suspected poison gas attack last weekend.

Pan-European air traffic control agency Eurocontrol said air-to-ground and/or cruise missiles could be used within the next 72 hours, warning that there was a possibility of intermittent disruption of radio navigation equipment.

Although Syria itself is not a significant oil producer itself, the wider Middle East is the world’s most important crude exporter and tension in the region tends to put oil markets on edge.

Oil markets were also supported by easing concerns over a prolonged trade spat between the United States and China after China’s President Xi Jinping on Tuesday gave a speech with a conciliatory tone.

“The relaxation of tensions between the U.S. and China (is) allowing oil traders to exercise their worries over geopolitics,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Not all oil market indicators pointed to ongoing price rises, however.U.S. crude inventories rose by 1.8 million barrels in the week to April 6 to 429.1 million, according to a report by the American Petroleum Institute on Tuesday, compared with analysts’ expectations for a decrease of 189,000 barrels.

And the U.S. Energy Information Administration said on Tuesday that it expects domestic crude oil production in 2019 to rise by more than previously expected, driven largely by growing U.S. shale output.

In its monthly short-term energy outlook, the agency forecast that U.S. crude oil output will rise by 750,000 barrels per day to 11.44 million bpd next year. Last month, it expected a 570,000 bpd year-over-year increase to 11.27 million bpd.

That will likely make the United states the world’s biggest oil producer by 2019, surpassing Russia which currently pumps out almost 11 million bpd.