OIL prices could potentially hit $100 per barrel, analysts at Deutsche Bank warned yesterday – as the cost of US light crude hit a 21-year record of almost $44.
Adam Sieminski, Deutsche’s global energy strategist, claimed that oil supplies have become so tight in recent weeks that a serious disruption in the Middle East could send prices rocketing to unprecedented heights.
He said: “It is worth asking ourselves – ‘what would happen tomorrow if we lost four million barrels a day, due to some accident?’ Or let’s say Iraq’s two million barrels a day became unavailable. OPEC’s got no spare capacity. And that could be it – $100 per barrel.”
Sieminski stressed that this was not a wild claim. “The last time OPEC was at 95-100 per cent capacity was in 1973-74, and again around 1980. And disruptions put prices up by 50 to 100 per cent.
“We’re at $40 already, so a repeat gives you $60-$80 per barrel.” Two separate instances of disruption, on this logic, could take the price up a further step to $100.
Benchmark US light crude came within a whisker of $44 yesterday, touching $43.92 at its peak. The price sank back to $43.50 by late evening.
The spike came after the US raised its security alert to “high”, citing a possible al-Qaeda attack on financial institutions. The announcement was made on Sunday, but yesterday was the first chance for markets to react.
Separately, Russian oil giant Yukos was told by Moscow it will begin investigating the company’s tax payments from 2002 – earlier than before, and a move that could add to its already massive bill.
The news was softened by an announcement from the Russian energy ministry that oil output in the country hit a new post-Soviet high of 9.33 million barrels per day in July. Brent crude, which rose above $40 to a fresh 14-year high of $40.05 on Friday, sank 20 cents to $39.85.
Sieminski said: “Most of the analysts who look at the fundamentals of supply and demand will tell you we’re now at the top [of the oil price]. But as long as the incremental supplies continue to come from countries where availability is an issue, the potential for prices to stay high is, itself, very high.”
Market fears will calm down if sabotage or other disruptions do not emerge, and this could see $5 a barrel come out of the price by the end of the year, he estimated.
“But, fundamentally, we’ve got to slow down demand growth. And, historically, the only way to make a lot of progress with that is a recession. So if you’re worried about the oil price perhaps you’ve got to ask, which do you prefer?”