Will oil hit $100 a barrel? It already did in some markets

A view shows oil pump jacks outside Almetyevsk in the Republic of Tatarstan, Russia June 4, 2023. REUTERS/Alexander Manzyuk/File photo

LONDON  – With oil investors and traders focused on an oil-price rally that has come close to $100 a barrel, some grades of crude oil are already trading above that milestone, highlighting an expectation of tight supply.

The outright price of Nigerian crude Qua Iboe surpassed $100 a barrel on Monday, according to LSEG data. Malaysian crude Tapis reached $101.30 last week, said Bjarne Schieldrop, analyst at Swedish bank SEB, in a report.

Oil has risen to its highest level in 2023 as investors are focused on the prospect of a supply deficit in the fourth quarter after Saudi Arabia and Russia extended supply cuts. The two are the biggest producers in the OPEC+ group, most other members of which are also curbing output.

“The overall situation is that Saudi Arabia and Russia are in solid control of the oil market,” Schieldrop said.

Brent oil futures, a global benchmark, traded as high as $94.89 on Monday and the related benchmark used for trading much of the world’s physical cargoes, called dated Brent, stood just above $96 according to LSEG.

Qua Iboe, and some other crudes priced against Brent, are above $100 already because they are based on the price of dated Brent plus a cash differential or premium, currently assessed by LSEG at around $4.25 a barrel.

Schieldrop said dated Brent is highly likely to move above $100 as “only noise is needed to bring it above.” Swiss bank UBS sees Brent futures reaching triple digits.

“We expect Brent to trade in a range of $90–100 over the coming months, with a year-end target of $95,” said UBS analyst Giovanni Staunovo.