Massive Gains For Oil As Analysts Forecast Monster Figures Before Demand Destruction Kicks In

Meanwhile, American motorists swallow high prices at the pump: File Image/Pixabay

Oil on Wednesday reverted back to familiar territory of huge price gains that at this stage nobody in the analytical community favours, and with several analysts warning that prices will escalate to unheard of proportions later this year.

A major Black Sea oil export terminal suspending loadings due to storm damage, combined with a drop in U.S. stockpiles, were said to be the factors in West Texas Intermediate rising $5.66 to settle at $114.93 per barrel; Brent increased $6.12 to settle at $121.60 per barrel.

The terminal halt is significant in that maintenance is expected to take two months and exports could be curtailed by 1 million barrels per day (bdp), putting further strain on an already deprived market in Europe.

As for the U.S. draws, an Energy Information Administration report stated that stockpiles fell 2.51 million barrels last week: another indication that even high pump prices can't deter American motorists from staying mobile – for now.

Ed Moya, senior market analyst at Oanda, said, "The energy market is looking at the short-term situation and medium-term situation, and it's bleak: you're looking at an elevated chance here of big swings higher and that the recent highs of $130 for WTI probably will prove not to be too hard to break."

Veteran commodities trader Doug King went a step further: he told media that resilient demand combined with supply shock from the Russia/Ukraine war will propel Brent to $150 per barrel.

He added, "Jet fuel demand is going to come back, travel is going to come back, I think people have money [and] they're going to go spend it, so I don't see the demand destruction at these prices."

King also noted that there are fewer options to pump more crude, and there's little sign that consumption is under threat.

Ben Luckock, co-head of oil trading at Trafigura, agreed: speaking at the FT Commodities global summit, he said current prices are not only justified but "I think you'll see a huge backwardation and I do think you'll see $150 this summer."

But Pierre Adurand, CIO at Andurand Capital, topped everyone with his forecast of where oil is headed: after stating that he thinks around 4 million bpd of Russian oil supply is already out of trade on the market, he told media that actual demand destruction would begin at $200 per barrel oil.

He said, "I feel like there's no demand destruction at $110 a barrel and we'll have to go significantly higher before demand can go down by enough…but that's also assuming there's no government mandate and some kind of confinement, where let's say two days a month, we are not doing anything."