Analysis-Oil price rally set to falter as demand doubts loom
By Robert Harvey and Natalie Grover
LONDON (Reuters) — Oil prices may be near $100 a barrel, but a range of factors could prevent a sustained rally above that level, analysts say.
They include a projected rise in non-OPEC production, in addition to Russia's need to boost supply to increase revenue and the potential for oil demand to slow given already-high interest rates in major Western economies.
Brent peaked at nearly $96 a barrel last week and U.S. West Texas Intermediate hit $91 a barrel for the first time in 2023.
A growing number of analysts forecast Brent will surpass $100 a barrel this year as demand rises, supply is constrained, and stocks of fuel and crude are relatively low.
Retail fuel prices in the U.S. and Europe have risen to multi-month highs as crude prices have rallied.
«If energy prices increase and stay high, that'll have an effect on spending, and it may have an effect on consumer expectations for inflation, things like that. That's just things that we have to monitor,” U.S. Federal Reserve chair Jerome Powell said last week.
Morgan Stanley analysts echoed the sentiment, that although central bankers may be wary of rising oil prices, a rally „must be sustained for some time to have a greater, more durable effect on core prices“.
A long run above $100 could increase inflationary concerns for governments that have hiked interest rates to combat rising prices as their economies emerged from the COVID-19 pandemic.
Non-OPEC+ output growth could calm any rally. Goldman Sachs sees non-OPEC+ supply rising by 1.1 million barrels per day (bpd) by next year, while the International Energy Agency has forecast growth of 1.3 million bpd.
Brazil, Guyana and the United States are among the countries expected
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