Sober Traders Steer Oil Prices Back On Upward Course As Bullish Sentiment Creeps In
Andurand thinks oil prices could hit $140 per barrel later this year: File Image/Pixabay
After two weeks of near constant hand-wringing over the bank collapses, investors finally took stock of the efforts of other financial institutions and government to avert a meltdown and caused oil prices on Tuesday to rise over 2 percent.
Brent settled up $1.53, or 2.1 percent, at $69.33 per barrel, while West Texas Intermediate settled up $1.69, or 2.5 percent, to $69.33.
Dennis Kissler, senior vice president of trading at BOK Financial, said, "A 'risk back on' sentiment seems to be coming back to crude, as the latest selloff may very well have been exaggerated liquidation."
Dennis Kissler, BOK Financial
The latest selloff may very well have been exaggerated liquidation
Oil was also supported by expectations that the U.S. Federal Reserve, which began its monetary policy meeting on Tuesday, will raise rates by 25 basis points instead of 50 bps.
Vikas Dwivedi, global oil and gas strategist at Macquarie Group Ltd., said this could have significant impact in that "If these big macro factors start to really turn the corner, oil will rally."
Still, Tuesday wasn't all good news for jittery investors: according to market sources citing American Petroleum Institute figures, U.S. crude inventories rose by about 3.3 million barrels last week instead of estimates for a 1.6 million barrel draw.
However, analysts that were previously cautious about oil's prospects in 2023 were in a bullish mood: Goldman Sachs, which this week predicted Brent's high would be $94 per barrel this year (compared with a previous projection of $100) now thinks a commodities "supercycle" will soon occur, driven by China's demand recovery.
Jeff Currie, global head of commodities for Goldman Sachs, told media with regards to the recent bank collapses, "As losses mounted, it spilled into commodities…..historically, when you have this kind of scarring event, it takes months to get capital back.
"We will still get a deficit by June and it will drive oil prices higher."
Hedge fund manager Pierre Andurand, president of Andurand Capital, was even more optimistic: on Tuesday he dismissed the recent fall in oil prices as speculative and predicted oil will hit $140 per barrel by the end of the year.
Moreover, he added that when oil demand peaks in 2030, the demand "won't fall down so fast: we will reach peak demand towards 110 million barrels per day and then a slow decline from there."