Oil Prices Will Rise To $100/Barrel Quicker Than Expected- Bank Of America

The Bank of America (BoFA) said that crude oil prices could hit $100/barrel by 2022, but the prices may jump earlier than predicted, Francisco Blanch, head of Global Commodities and Derivatives at the bank said.

In June, the BofA Global Research said the anticipated strong demand recovery would outpace supply and lead to oil prices rising to $100 per barrel in 2022.

“We believe that the robust global oil demand recovery will outpace supply growth over the next 18 months, further draining inventories and setting the stage for higher oil prices,” analysts at BofA wrote in June.

Oil prices are currently above $70 dollar per barrel, with Brent Crude trading at $75.34 per barrel as of Friday.

But Blanch explained that a cold winter could trigger a quicker rise in prices of crude.

“A very cold winter could send oil prices to $100 per barrel sooner than expected,” Blanch told Bloomberg on September 13.

In a note dated September 10, it said a colder than normal winter could lead global oil demand to surge by 1 to 2 million barrels per day.

“Downside risks include a new COVID-19 wave, taper tantrum, a China debt crisis, and the return of Iranian crude barrels. Having said all of that, winter weather risk is quickly becoming the most important driver of energy markets,” BoFA added.

With crude oil hitting $100 per barrel, Nigeria would have more foreign exchange to meet its fiscal deficits as oil benchmark in the 2021 budget was pegged at $40/barrel.

Crude oil export constitutes over 90 per cent of foreign exchange as dollar-starved Nigeria would see enough forex to boost its reserves which is currently at $35.27bn.

Recently, due to the dollar crunch faced by Africa’s largest oil exporter, the Chief Executive Officer of Guaranty Trust Holding Company Plc, Segun Agbaje, said banks do not have dollars to fund the acquisition of Shell Petroleum Development Company.

They need at least $1.8bn and raising the money in the local market has not been easy.