Oil & Gas News

Could Oil Really Reach $200?

Big Oil Price Down, phillips 66, capex, oil and gas, oil

By: Irina Slav – OilPrice.com – Oil is about to post its fourth week of gains in a row, and the outlook remains bullish thanks to supply constraints and demand strength. But one hedge fund manager is even more bullish than that.

Doug King, head of the Merchant Commodity Fund, enjoyed record returns last year, gaining 74 percent in 2021 and beating its previous record of 59 percent set in 2014—another boom year for oil right before the bust. But now, King is expecting further gains in the price of oil, saying it could even reach $200 per barrel over the next five years.

More: Stay informed on oil & gas news. Sign up for our weekly FREE oil and gas newsletter HERE

“We believe in structural supply-side commodity inflation that most will not have ever seen — the highest since the 1970s,” King told Bloomberg in an interview, adding, “Only OPEC will react to price metrics and they are undershooting every month.”

OPEC and its OPEC+ partners have been struggling to produce as much as it has agreed to under its production control agreement that came in response to the devastation that the pandemic wrought on the oil market in 2020. Only a few members of the extended cartel have the capacity to boost production in line with quotas while the rest are finding it hard, prompting worry about future oil supply in a strong demand situation.

“In practice, a lot less oil is making its way to the market,” the Merchant Commodity Fund wrote in its investor letter, as quoted by Bloomberg. “Its members are simply unable to return to pre-covid levels of output. This is all down to a lack of investment.”

Russia is a notable example of a producer that is nearing the limit of its available production capacity, the fund’s management also noted in the letter.

What this means for prices is further upward potential, especially if demand continues as strong as it is currently.

Oklahoma & Texas Mineral Owners:  Book a Free consultation and find out what you don’t know about your oil and gas mineral rights.

ADDED BONUS – Get our FREE Mineral Rights Guide HERE

To Top
Lease or Sell Your Minerals Rights in Oklahoma or Texas ➡️(405) 492-6277

Have your oil & gas questions answered by industry experts.