Oil: If prices exceed $100, expect “demand destruction,” analyst says


Oil prices have been rising since the summer amid the supply crisis. This has raised a question on Wall Street: How high can the price of crude oil get before higher energy prices actually hurt demand?

Tuesday West Texas Average (each = q) was trading above $92 per barrel, while Brent crude futures were trading (Bz = F) hovering above $95 per barrel.

Andy Lipow, president of Lipow Oil Associates, told Yahoo: “I think you need to see crude oil prices at $100 to $110 per barrel with gasoline prices at $4.00 to $4.25 per gallon for the consumer to change their driving habits, which will devastate the demand”. finance.

Gasoline prices on Tuesday hovered around their highest levels in 2023, with a national average of $3.88 per gallon, according to AAA.

“Gasoline prices across the country are currently pricing in significant supply and demand imperfections,” Tom Kloza, global head of energy analysis at OPIS, told Yahoo Finance.

Prices for various types of gasoline available are displayed electronically at a pump at a filling station on Monday, Sept. 18, 2023, in Newcastle, Wyoming. (AP Photo/David Zalubowski)

Energy prices have risen steadily since late June. Crude oil production cuts imposed by some of the world’s largest oil producers in OPEC+ and unilateral cuts from Saudi Arabia have helped lift crude oil futures by about 30% over the past three months.

says global head of commodities research at Citi Ed Morse Oil may reach $100 and stay there “for a short time” But it indicates a decline as increased supply from places like the United States, Canada, Brazil, Iran and Venezuela reaches the market. He also notes that “Saudi Arabia may back away from cuts if markets become too tight.”

“It is entirely possible that WTI trades above $100 before supply and demand factors overwhelm the momentum,” Jay Hatfield, CEO of Infrastructure Capital Management, told Yahoo Finance.

“We think there will be significant demand destruction in… [WTI] “Prices above $95 per barrel, which will bring the commodity back into our fair value range,” he added.

The rise in oil prices raises growing concerns about its impact on the broader economy at a time when the Federal Reserve is trying to curb inflation.

Fed officials expect To keep interest rates steady when they meet this week however Still keep the door open Another increase in interest rates this year.

Energy prices, specifically gasoline, were the biggest reason for August CPI prints hotter than expected Released last week.

Ince Ferry is Yahoo Finance’s chief business correspondent. Follow her on Twitter at @ines_ferre.

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