Oil prices could soon return to $100 as OPEC+ considers ‘historic’ cut, analysts say

An influential alliance of some of the world's most powerful oil producers is reportedly considering their largest output cut since the start of the coronaviruses epidemic this week, a historic move that could push oil prices back towards triple digits.

The next phase of production policy is expected to be decided at a meeting in Vienna on Wednesday.

According to sources, the oil group is considering a production cut of more than a million barrels per day.

The ministers will not be coming to Austria for the first time in two years. The group's first in-person meeting since 2020 is going to be a historic cut.

The actual number of barrels coming off the market is expected to be around 500,000, which is enough to support the market in the near term, according to Pickering.

The price of oil rose on Monday.

The international benchmark crude futures were up 4% to $88.54 per barrel.

Crude oil storage tanks at the Juaymah Tank Farm in Saudi Aramco's Ras Tanura oil refinery and oil terminal in Ras Tanura, Saudi Arabia, on Monday, Oct. 1, 2018. OPEC+ is mulling slashing output of more than a million barrels per day, according to sources. The move would mark the biggest undertaken by the organization to address weakness in global demand.

After heavy losses in September, there appears to be some upside potential for oil prices.

Oil prices could go back to $100/bbl if there is a further increase in trading activity.

A winter of hope and expectation is on the way for those who are bullish.

Echoing this call of a return to $100 a barrel, analysts at Goldman Sachs see Brent reaching triple digits over the next three months, before climbing to $105 over a six month horizon.

By the end of the year, the U.S. investment bank expects the price of oil to hit $100 per barrel.

The price of oil will not be supported at $50 to $60 per barrel by the Organization of the Petroleum Exporting Countries.

They're showing a determination to protect the price. They don't worry about demand.

Despite what people will say, we're gonna see some pretty sticky energy inflation as we move forward over the next couple of years.

The real concern is how recession risks will stoke demand fears, and that's what Pickering told CNBC.

Last month, oil prices fell by more than $4 to their lowest level since Russia's invasion of Ukraine in February, due to demand concerns.

"I don't think it's going to be enough for oil prices to go back to their June high," said Ole Hansen of Saxo Bank.

If they cut by 1 million or 1.5 million, they will have to change the quota system for that number to be a real cut in the market.

It is likely that they are meeting face-to-face this week in Vienna because it is a potentially controversial decision. The impact is likely to be less than what the market is looking for.

Other supply-side factors that will prop up oil prices for the next four to eight weeks include a production cut by the Organization of the Petroleum Exporting Countries.

If European sanctions kick in at the end of the year, we will see more support from the supply side. The U.S. government's emergency oil supply will be shut down in November.

The U.S. Energy Department will sell up to 10 million barrels of oil from the SPR in November.

Storage tanks and oil processing facilities operate beside the Arabian Sea at Saudi Aramco's Ras Tanura oil refinery and terminal in Ras Tanura, Saudi Arabia, on Monday, Oct. 1, 2018. The upcoming OPEC+ meeting in Vienna will result in an oil production cut "of some historic kind", said CIO of Pickering Energy Partners, Dan Pickering.

The EU will impose sanctions on Russian crude in December. Concerns over an already tight energy market could be made worse by the ban.

Despite what people will say, we are going to see some sticky energy inflation as we move forward over the next couple of years.

At the beginning of September, the Organization of the Petroleum Exporting Countries surprised markets by announcing a 100,000 barrel per day production cut.