Oil: Warning about "super-inflation" of prices above $100

American crude oil is trading near $100 per barrel, Brent is around $110, and Neal Dingmann, a research analyst in the energy sector at William Blair, estimates that the next move could be a "super-inflation" of prices. "We could see a super-inflation, as many directors of major oil companies have implied," said Dingmann on Yahoo Finance. "If I believe it is possible? Absolutely." He noted that executives in the oil sector repeat that prices now have a new, higher floor for the next at least three quarters, and he agrees: the average price, which most analysts previously placed at $70 to $80 per barrel, is now "more likely to be around $80 to $90 per barrel," with periods when it will exceed $100. "We saw attacks on Iranian tankers, we saw chartering costs at record levels," explained Dingmann. "In reality, it is the underlying physical market that continues to become tighter." The energy sector has seen an increase of over 50% this year, recording the best performance among the 11 sectors of the S&P 500 index, significantly surpassing the index's gain, which is around 12%. U.S. crude oil has increased by more than 70% since December 31st, while Brent, the global benchmark, is up by about 80%. Dingmann added that geopolitical and political events "have now caused real physical events" and that temporary solutions will be difficult to implement: "It will be very difficult to dispose of quantities of oil from the Strategic Petroleum Reserve (SPR) or to provide other temporary solutions." The Strategic Petroleum Reserve has already fallen to its lowest level since 1982. Diesel And there is diesel: Forward contracts for heating oil, a benchmark for diesel, have doubled this year. "I think we have already seen record prices and we will see even higher ones," estimates Dingmann, referring to "diesel, gasoline, and home heating fuels" as winter approaches. This is bad news for consumers and good news for American oil producers, who, according to Dingmann, "will just continue to make money." As he reported, most of the companies he monitors recorded record free cash flows in the second quarter, and he expects new records in the third or fourth quarter. Not everyone believes on Wall Street that there is a sudden rise in oil prices. Goldman Sachs Disagrees On Monday, Goldman Sachs revised its target for December, setting the price of Brent crude at $90 per barrel and U.S. crude at $81 per barrel, levels lower than current trading prices. The bank estimates that Brent will reach $125 only if oil infrastructure suffers losses, maritime attacks intensify, or the risk premium remains. Source: ot.gr