Oil prices have been rising to multi-month highs recently on tightening supply and recent production cuts by Saudi Arabia and Russia. As a result, Chevron (NYSE:CVX) CEO expects prices to exceed $100 a barrel, a move that could extend the fight against inflation and cause a drag on the global economy.
Surging Oil Prices Unlikely to Significantly Damage the Global Economy
Chevron CEO Mike Wirth expects oil prices to hit $100 a barrel, a level not seen in over a year. Wirth’s forecasts came in light of increasing oil supply constraints, potentially setting the stage for crude prices to reach triple-digit figures.
“Supply is tightening, inventories are drawing. These things happen gradually and you can see it building, and so I think…the trends would suggest that we’re certainly on our way.”
– Wirth noted.
Wirth warned that an oil price of $100 per barrel could cause a “drag” on the US and global economies, which many market watchers feared. However, the oil giant’s CEO said if such a surge should happen, it is unlikely to damage the economy substantially.
“But you know, we’ve had relatively higher oil prices here now for most of this year and certainly all of last year. The recession that everyone’s been talking about hasn’t arrived. And so I think the underlying drivers of the economy in the U.S. and frankly globally remain pretty healthy.”
– he added.
Oil firms turned record profits in 2022 after energy prices skyrocketed as the world returned to normal following COVID-19 lockdowns and due to Russia’s invasion of Ukraine. Surging gas costs, alongside other drivers, propelled inflation to the highest level in 40 years last year.
Crude Prices Edge Higher Amid Ever-Tightening Supplies
Meanwhile, oil prices increased on Tuesday as investors reacted to worsening supply limitations. The benchmark Brent crude advanced 0.6% higher to $94.98, while the West Texas Intermediate (WTI) climbed 1.1% to $92.48.
The upswing comes just days after oil prices printed a 10-month high.
Traders have been turning a blind eye to concerns about China’s economic growth and a slowdown in Europe’s economy. This led to rising commodity prices amid dwindling supplies as Russia and Saudi Arabia cut production.
According to the International Energy Agency (IEA), the extension of 1.3 million barrels per day (bpd) of crude oil production reductions by the end of 2023 will likely result in a considerable market deficit in Q4.
Do you think Wirth’s price prediction for oil prices will likely come to fruition? Let us know in the comments below.