Markets brace for $100 oil by May as Saudis turn screws on supply

OIL prices are poised to hit $100 a barrel by May, analysts have warned, as Saudia Arabia extends supply cuts.

Rising geopolitical tensions and extended Opec cartel production curbs have led economists to predict that oil prices will surpass $100 for the first time since summer 2022. Bjarne Schieldrop, chief commodities analyst at SEB bank, said he expects the price of Brent crude, the global benchmark, to reach that level in May or June.

He said: “Towards the end of Q2, I think it’s natural to assume that we’ll see the price move towards the $100 mark.”

The price of Brent crude has risen some 20pc since the start of the year to more than $91 per barrel. Opec, the Saudi-led cartel, said in March it would extend supply cuts of 2.2m barrels per day for a further three months.

Prices of $100 a barrel should prove temporary unless Russia and Saudi Arabia extend supply cuts for longer, Mr Schieldrop said, adding: “It’s a totally artificial price controlled by Opec. The big question is what will Opec do in Q3.”

Callum Macpherson, head of commodities at Investec, says the price of oil will hit $100 by June if it continues on the trajectory it has followed since December.

However, the question of how long oil prices remain high depends on escalating tensions in the Middle East, analysts said. In a client note last week, Daan Struyven, head of oil research at Goldman Sachs, warned that extended Opec supply cuts “could send Brent above $100 for some time”.

Ole Hansen, an analyst at Saxo Bank, said it could hit $100 “within days” if Iran and Israel engage in conflict that disrupts local oil supplies.

A major increase in oil prices will raise the risk of inflation remaining high for longer as it drives up the cost of petrol and energy.

Chris Hare, senior economist at HSBC, said that a sustained 10pc rise in oil prices typically adds between 0.1 and 0.2 percentage points to UK inflation.

Ashley Webb, of Capital Economics, said this would be a problem for the services sector, as cooling inflation has been driven by falls in the most energy-intensive sectors, such as transport, hotels and restaurants.