Crude oil could hit $100 per barrel if the winter turns out cold, one analyst has warned, adding that natural gas prices could double from current levels.
BMO Capital Markets oil and gas research managing director Randy Ollenberg told Bloomberg that "We're in a really weather-sensitive situation here where we could see natural gas prices really, even, double from here if we get some really cold weather and we could see crude oil prices break through US$100."
"There could be some pretty significant increases in pricing here if we do get some really cold weather early – so, in December," Ollenberg said. "We're talking about cold weather in Europe and Asia, that's really where it's critical."
However, if the weather turns out to be mild during the winter, prices will correct during the first quarter of next year, the analyst also said.
Ollenberg is not alone in this bullish outlook. In a separate interview with Bloomberg, Ira Epstein from asset manager Linn and Associates said he expected West Texas Intermediate to hit $90 by the end of the year on strong demand for oil coupled with not enough new supply.
The sentiment was echoed by Goldman Sachs, too. The investment bank, which earlier this month revised up its price forecast for Brent to $90 per barrel by year-end, now says it could top $90 per barrel. The bank cited utilities' switch from gas to oil as a factor for this revision as it could potentially add 1 million bpd to global demand for oil.
"While not our base-case, such persistence would pose upside risk to our $90/bbl year-end Brent price forecast," Goldman analysts said, adding there was further space for oil to grow, too.
"We would need prices to rise to $110 /bbl to stifle demand enough to balance the market deficit we currently see in 1Q22 given our expectation that OPEC+ continues on the current path of +0.4 mb/d per month increases in quotas."
By Irina Slav for Oilprice.com