Could oil hit $100 a barrel in 2023?

The outlook for the oil market in the latter half of 2023 appears increasingly positive, marked by a series of bullish signals. These indicators point towards a tightening in supply and demand dynamics, hinting at possible deficits in the upcoming quarters. West Texas Intermediate (WTI) crude oil, for instance, has shown a strong recovery, climbing to around $80 per barrel in July, a notable rebound from a sluggish performance earlier in the year.

Key indicators reinforcing this bullish sentiment include significant reductions in crude oil inventories reported in July and the state of the crude oil futures curve, which is currently in a state of firm backwardation. Backwardation, where future prices are lower than current prices, often signals a market supply deficit, implying strong current demand or constrained supply.

On the supply side, major oil producers like Saudi Arabia and Russia are planning to extend their production cuts, a move likely to further constrict the market. This, coupled with other market technicals and trends underpinned by fundamental indicators, paints a promising picture for the oil market in the second half of 2023.

However, this optimistic scenario is not without its potential challenges. Factors such as the possibility of increased production in response to price spikes, the potential release of oil stockpiles by China, and uncertainties surrounding global economic growth could act as limiting factors on oil prices. These elements introduce a degree of unpredictability, suggesting that while the overall outlook is favorable, the oil market remains subject to a variety of influencing factors that could alter its trajectory.

Source: Seeking Alpha “Could We See $100 Oil In 2023?”