Oil prices are heading higher and could soon return to $100 per barrel as war in the Middle East and speculators drive market
It wouldn’t be the first time that oil experts have got it spectacularly wrong when predicting the price of crude.
Goldman Sachs went against the prevailing mood in 2008 when it famously predicted that crude would hit $200 per barrel within months. Instead, oil crashed to levels around $40 per barrel as the global financial crisis punctured world demand.
This time around, the US investment bank decided to follow the consensus view on Wall Street when earlier this year it downgraded its short-term forecast for the price of a barrel to around $40 per barrel.
But instead of falling, oil has rallied strongly. Brent crude now trading above $63 per barrel is up 36pc since reaching its year low in early January. At this rate oil will be back at $100 per barrel by the end of the summer driving season in the US when middle-class America hits the great open roads to visit their ‘Aunt Agatha’ in Pennsylvania.
The sun sets on drilling (Image: Pexels)
So why has the short-term outlook for oil changed overnight?
Lower prices have started to filter through to boosting growth in the world’s most advanced economies and with it demand for gasoline, which is once again on the rise.
Here are six reasons why oil is heading back to $100:
The market is tighter than you think: World demand for crude oil is beginning to rebound. After growth in consumption slowed last year the early signs are that demand is beginning to pick up led by developed markets that are responding to a period of lower prices. The Organisation of Petroleum Exporting Countries (Opec) expects demand for oil to grow by 1.17m barrels per day (bpd) in 2015 but this is a conservative estimate. Another 500,000 bpd of crude would erase the current 1.5m bpd surplus in the market. Remove this tight surplus and oil is back above $100 in a heartbeat.
Read more: Telegraph