A strategist for CNBC said that oil prices could see an "off-the-charts spike" as winter nears, but that OPEC and its allies keep to their earlier pact regarding oil production. OPEC+, the Organization of the Petroleum Exporting Countries has been under pressure by top consumers such as India and the United States to increase oil supplies following an upsurge of 50% in oil prices this year. The oil cartel reaffirmed its commitment to increase oil production by 400,000 barrels per daily (bpd), in November. This was despite being under pressure from top consumers like India and the United States.
It is more important than anything to anyone out there, I believe, what happens during winter? Is there a chance we will have another Arctic freeze. John Driscoll JTD Energie Services
John Driscoll is the chief strategist at JTD Energie Services. He said that OPEC+'s decision was a "very prudent action to take" when one considers ongoing energy crises as well as possible disruptions. "I think what's more important to everybody out there is what happens during winter?" Is there a chance of another Arctic freeze? Driscoll spoke on Tuesday to CNBC's "SquawkBox Asia". Driscoll pointed out the lack of fuel in the U.K., with long lines of cars waiting to purchase gas and "fist fights." People have been buying fuel in panic, creating fuel shortages and straining fuel supply chains.
BURY ST EDMUNDS SUFFOLK, UNITED KINGDOM – 2021/09/25: People filling up their cars at BP petrol stations during the fuel crisis in Bury St Edmunds. LightRocket
Driscoll stated that "when you get into winter you really need to worry about this non-discretionary desire." Non-discretionary demands refers to spending that is essential for the purchase of daily goods or services. Driscoll stated that a low inventory or any supply chain problems are particularly worrying. The panic buying of fuel in Britain has strained supply chains. This is partly due to a shortage of truck drivers and Brexit. The U.K. has had to resort to using the military to transport fuel.
Driscoll said that one scenario could be a spike in oil prices. "I don’t hear anyone talking about the prospects for a mildly subdued winter. Given all the uncertainties over weather and climate, I believe we could be in for an exciting ride. After the OPEC+ decision, oil prices reached a three year high. Brent reached $82.47 per barrel Wednesday morning in Asia hours. WTI was at $78.84.
However, energy prices are already on the rise this year. Crude oil rose more than 50% in one year. This adds to inflationary pressures.
Oil at $100?
Driscoll stated that it is possible for oil prices to jump to $100 per barrel, but it is not sustainable. I see it as a scenario with a lower probability. If everything goes wrong, such as Arctic weather, or if there are glitches in delivery, supply chains, or deliveryability issues. He said that while it is possible, I do not believe it will be sustainable. Driscoll also mentioned the Chinese energy crisis, which caused widespread disruptions when local authorities shut down many factories.