The $100 oil price has almost become a consensus on Wall Street

Can international oil prices continue to rise?

In the eyes of Wall Street investment banks, the inability of crude oil production to keep up with the demand for economic recovery, coupled with turmoil in Russia, Ukraine, and the Middle East, makes it very bullish for crude oil. Major Wall Street banks such as Morgan Stanley and Goldman Sachs have recently raised their target prices for oil, expecting international oil prices to surpass $100.

Who is driving oil towards the $100 mark?

The disturbances in the Middle East and Russia-Ukraine conflict are the main factors that Wall Street investment banks are bullish on oil. Goldman Sachs stated:

The recent rise in oil prices to over $90 has been somewhat influenced by the geopolitical conflicts in the Middle East and Russia-Ukraine, as geopolitical conflicts may disrupt related infrastructure in the oil industry chain, leading to a reduction in oil supply, which is expected to push oil prices to $100.

Another key driver of the rise in oil prices is the continuous global economic recovery driving strong demand for oil, while oil supplies in many regions continue to tighten.

The International Energy Agency (IEA) predicts that global oil demand will increase significantly by 2024 due to the economic recovery of countries such as the United States and India. Especially with the recent positive non-farm payroll and manufacturing data announced by the United States, investors' pessimism towards oil demand is gradually turning positive.

The ongoing production cuts by oil-producing countries are also laying the foundation for oil prices to hit $100 in the future.

Natasha Kaneva, a commodities analyst at Morgan Stanley, pointed out at the end of March:

Russia's unexpected production cut decision in March may push Brent oil prices to the $100 mark by September this year.

In addition to OPEC and Russia's ongoing production cuts, even Mexico has recently considered reducing production. Mexico's state-owned oil company Pemex stated that in order to maintain normal domestic oil consumption, it will further reduce production in May.

Currently, more than just Morgan Stanley and Goldman Sachs are bullish on oil prices reaching $100. Francisco Blanch, an energy strategist at Bank of America, has been bullish on oil since last year and expects Brent oil to hit $100 by the end of 2023.

Although Bank of America's view may seem somewhat aggressive at the moment, international oil prices have steadily risen over the past 5 months. Since April, Brent oil has been hovering around $90, and the $100 mark does not seem far away.

Potential impacts of high oil prices

The continuous rise in oil prices is beneficial for alleviating the fiscal deficits of oil-producing countries, but it is detrimental to the national economy, especially consumer spending. The inflation risks caused by high oil prices may lead the Federal Reserve to reconsider its upcoming inflation reports, even further delaying interest rate cuts, and triggering investor panic.

For consumers, excessively high oil prices are also unbearable. Mark Zandi, Chief Economist at Moody's, stated: "People may be able to tolerate oil prices of $85 or even $90, but if it approaches $100, then there will be a big problem. Low-income families will be the first to be impacted, further weakening people's consumer confidence, especially as the peak summer travel season approaches."

More importantly, sustained high oil prices can even affect the U.S. presidential election. Zandi emphasized:

"According to our model predictions, gasoline prices are one of the important variables for the November election. With crude oil prices continuing to rise, if gasoline prices can remain above $4 per gallon and persist until the election, the election outcome is likely to change."