Oil price could hit US$200 per barrel this year: expert

An expert has said it's possible the oil price could climb to US$200.

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Key points

  • One commodities expert believes there is potential for the oil price to reach US$200 per barrel this year 
  • The loss of Russian oil production is adding to the upwards pressure 
  • Experts currently rate Woodside and Santos as buys 

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The oil price could go as high as US$200 per barrel, according to a resources expert.

There has already been a surge in the oil price this year after the Russian invasion of Ukraine.

Oil companies have seen their valuations soar. The Woodside Petroleum Limited (ASX: WPL) share price has gone up around 40% in 2022, the Santos Ltd (ASX: STO) share price has risen 15% and the Beach Energy Ltd (ASX: BPT) share price has surged 20%.

But what could happen next?

Oil price expected to remain high

The oil price had been steadily declining up until Thursday. But then Brent crude oil jumped 8.8% to US$106.64 per barrel.

The Australian Financial Review reported that the recent fall in the oil price was because there were signs that Russia and Ukraine may be able to agree to a ceasefire. But then, on Thursday, Russia said that reports of significant progress were wrong.

One broker, Morgan Stanley, thinks that oil prices could go higher. That's because global oil inventories are being utilised, but inventories are already at multi-year lows, so Morgan Stanley believes this will continue to put "upwards pressure on oil prices". The third quarter Brent crude oil price is now expected to average US$120 per barrel in the third quarter.

The AFR reported that Morgan Stanley believes Russian oil production will decline by 1 million barrels a day.

Could the oil price reach US$200 per barrel?

A French fund manager believes that it's possible that the oil price could go to US$200 per barrel by the end of the year.

This resources expert has been performing strongly with his commodity strategies in recent years.

That fund manager is Pierre Andurand. According to the AFR, last week the Financial Times reported that one of his hedge funds, the Andurand Commodities Discretionary Enhanced Fund, had made returns of 154% in 2020, 87% in 2021 and 109% in the 2022 year to date. He said to Bloomberg's Odd Lots podcast:

I was expecting prices to go above $US150 before the Russian invasion. I think, like [it could go] close to US$200 a barrel, so much higher than today. I feel like there's no demand destruction at US$110 a barrel, and we'll have to go significantly higher before demand can go down by enough.

Are petroleum ASX shares attractive opportunities?

Brokers do currently have buy ratings on Woodside. However, the price targets are above where Woodside is currently trading.

UBS has a buy rating on Woodside with a price target of $29. Credit Suisse also rates Woodside as a buy, with a price target of $30.50. However, it's possible these price targets could change with ongoing volatility with the oil price.

Brokers are much more optimistic about the prospects of the Santos share price.

Morgan Stanley rates Santos as a buy, with a price target of $10.40. That's more than 30% higher than today's Santos share price.

UBS rates Santos as a buy, with a price target of $8.90. That's close to 20% potential upside.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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