FXStreet reports that Art Woo, Senior Economist and Director Economics at the Bank of Montreal, said that with WTI piercing US$70/bbl, the chatter of $100 oil has picked up steam.
“Beyond higher-than-expected prices, we think another key development that is working in OPEC+’s favour is the fact that the recovery in US crude oil production has remained muted to date.”
“We wonder if OPEC+ would be truly comfortable letting crude oil prices run significantly higher despite the obvious economic benefits of greater export dollars and fiscal revenues. Indeed, crude oil prices, if sustained, have already reached levels that would push many key OPEC+ members’ budgets back into surplus.”
“Letting oil hit $100 or $90, particularly on a sustained basis, would also surely increase the viability of some U.S. production shut in last year. Moreover, there is the risk that higher prices could fast-forward the move to renewable energies (i.e., electric vehicles). As a result, there is a possibility that OPEC+ could begin to unwind its production cuts a little more aggressively despite a potential return of Iranian production.”
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