Oil to hit $100? Analysts expect a return to triple digits before 2024

Oil prices climbed to their highest level of the year this week, extending a rally that has put a return to $100 a barrel sharply into focus.

Indeed, some analysts believe crude prices could hit this milestone before year-end.

International benchmark Brent crude futures traded 0.3% lower at $93.46 a barrel on Friday afternoon in London, while U.S. West Texas Intermediate futures stood little changed at $90.09.

Both Brent and WTI settled at their highest respective levels of the year on Thursday. The oil contracts are sharply higher month to date and remain firmly on track to notch their third consecutive positive week.

The price rally comes amid growing expectations of tighter supply after Saudi Arabia and Russia moved to draw down global inventories and extend their oil output cuts through to the end of the year.

OPEC kingpin Saudi Arabia said Sept. 5 that it would extend its 1 million barrel per day production cut through to year-end, with non-OPEC leader Russia pledging to reduce oil exports by 300,000 barrels per day until the end of the year. Both countries have said they will review their voluntary cuts on a monthly basis.

Analysts at Bank of America have indicated they now believe oil prices could soon rally above $100.

“Should OPEC+ maintain the ongoing supply cuts through year-end against Asia’s positive demand backdrop, we now believe Brent prices could spike past $100/bbl before 2024,” analysts led by Francisco Blanch said Tuesday in a research note.

Tamas Varga of oil broker PVM said a jump toward the $100 milestone was “plausible,” citing production constraints from Saudi Arabia and Russia, upcoming refinery maintenance, the structural shortage of diesel in Europe, and a growing consensus that the current cycle of tightening will soon come to an end.

“Nonetheless, such a rally also entails renewed inflationary pressure,” Varga told CNBC on Friday. This was reflected, he said, in this week’s U.S. inflation data and the rise in consumer spending, which indicated that interest rates may stay higher for longer and could have a negative impact on both economic and oil demand growth.

“For this reason, I believe that any spike towards $100 will be short-lived,” he added.

The International Energy Agency warned Wednesday that Saudi Arabia and Russia’s production constraints would likely result in a “substantial market deficit” through the fourth quarter.

Not everyone believes oil prices are destined for an imminent return to $100, however. Ole Hansen, head of commodity strategy at Saxo Bank, says the crude sector looks increasingly overbought in the near term and appears in need of a pullback.

“We do not join the $100 per barrel camp but will not rule out a relatively short period where Brent could trade above $90,” Hansen said in a research note published Sept. 8.

“From a technical perspective, Brent has been in a bullish uptrend since July and needs to hold support at $89 as a break may trigger long liquidation towards $87.5 from traders who bought the production cut extension news,” he added.

“However, the medium-term uptrend is still firm with trendline support near $85, potentially being the bottom of a new higher range supported by OPEC’s active management of supply.”

— CNBC’s Michael Bloom contributed to this report.