Crude prices will be extremely volatile in the coming years, driven more by supply constraints than demand in the face of increased funding for renewable energy technologies, says William Reed II, CEO of Castleton Commodities International.
“You could see spikes of up to $ 100 a barrel, even $ 130, and you could also see a decline to $ 35 … in the future,” said the executive during his participation in the FT Commodities Global Summit. “The question is which comes first. Peak demand or peak investment?”
His comments follow those of European firms that see a return to $ 100 as a real possibility. Oil hasn’t been above that threshold, not even $ 90, since a sharp recession in 2014 when rising US shale crude shook global markets.
Reed said an immediate decarbonization of the world was risky and impossible and believes his company will continue to focus on the natural gas and energy markets as demand will increase with the energy transition.
The executive said the barrel rally was not linked to a broader supercycle, which is trading around $ 70 a barrel.
Metals like copper and aluminum recently hit multi-year highs and new infrastructure needs to meet energy demands in the energy transition are poised to drive prices even higher.
“There is a recovery from COVID-19 … these (oil) prices of $ 60 or $ 70 (a barrel) are not that shocking. We have been in that neighborhood for quite some time,” he added.
Reed expects demand to return largely to pre-pandemic levels by the end of this year, based on oil product, risk of COVID-19 variants and access to vaccines in emerging markets.
