$100 Oil?

We’re all but ruling out $100 oil, despite increasing chatter about a “super-cycle.” With OPEC spare capacity enough to accommodate a complete return to pre-pandemic levels of consumption, and with US production growing back to pre-pandemic levels gradually over the coming 18 months, Saudi is enjoying a moment in which it can dictate prices. The current regime has no experience with high prices, so there is no history to go on. But the oil minister has said “it’s my job” to prevent a super-cycle. We’ll learn more by seeing whether and by how much OPEC eases production quotas this week. An Iran nuclear deal is still a possibility, though perhaps less so than before. While US recovery will be gradual, it is aggressively underway, led by record activity levels in the Permian. Putting it all together, at this time we see buffers against large price moves in crude in either direction.