Sooner or later, oil comes to the surface.
It’s true in the world of nature. Any spillage of oil or gasoline on a lake or pond will float above the water.
It’s true in the world of subsurface geology. Crude oil wants to rise to the surface of the earth. That’s why “traps” and anticlines hold oil. The caprock above these deposits is impermeable enough that the migrating oil collects there and rises no further—until the trap is pierced by a drillbit.
And oil will come back up to the surface in the world of free trade as well.
It might take time. But analysts are increasingly voicing bullish viewpoints on oil’s prospects.
Back in June, Goldman Sachs, Trafigura Group, and Bank of America all cited the magical $100 figure when predicting how high crude oil could go in 2022, provided certain conditions are in place. And those conditions were all considered plausible enough.
More recently, Bank of America doubled down on its $100 figure, stating that crude prices could reach that level as early as this coming winter, if temperatures get cold enough. (Previously, Bank of America had looked to mid-2022 for its projected milestone.)
According to BoA, “Downside risks include a new COVID-19 wave, taper tantrum, a China debt crisis, and the return of Iranian crude barrels. Having said all of that, winter weather risk is quickly becoming the most important driver of energy markets.”
And in September, the website OilPrice.com published numerous reports that showed growing optimism. Among the headlines were these:
- Oil Jumps To Six-Week High On Brighter Demand Outlook
- How Long Can U.S. Shale Producers Resist The Oil Price Rally?
- Bearish Catalysts For Oil This Fall
- Chevron CEO: Oil Prices To Remain Higher For Longer
Whatever the short term may hold, it appears that the longer term (that is, 2022 and beyond) promises some strengthening in the marketplace. Let’s hope for stability at home and a comeuppance in the patch.
—Jesse Mullins