Prices for oil are on the rise, and it appears that there’s no way to stop them. The December-January international benchmark was set Brent crudeThe barrel price has increased by $11 per barrel. This is due to rising inflation, supply concerns and geopolitical tensions.

Energy analysts believe Brent exceeding $100 per barrel is almost an assumption at this stage. However, forecasters are now predicting Brent to surpass $125 per barrel or higher. 

“CNBC’s John Driscoll said Monday that because of the underinvestment in capital exploration we’re at risk of running low on oil. There is an option where oil prices could rise to $120 or even $150 per barrel. 

Brent crudeIn the past week, it surpassed $95 per barrel. This is its highest point since 2014’s summer and an impressive 63% rise year-on-year. On Wednesday, it was at $93.98 per barrel in London at 10:20 AM. 

The threat of Russian invasion into Ukraine has also contributed to the rise in prices, but a partial drawdown of Russian troopsOn Tuesday, the price of the commodity fell by 3% due to misinformation from Ukraine’s borders. Moscow denies any threat of invasion. However, NATO leaders Joe Biden and the U.S. president have rejected this assumption. insist that the risk of war remains high. 

Driscoll explained that Driscoll is referring to “not just the geopolitical headwinds” but rather the “fundamentals.” 

Market is experiencing what we refer to as a sharp backwardation, which means that oil prices are more expensive than any physical supply. He explained that we are beginning to see signs of a recovery in demand and that supply shortages will be a problem. 

Those shortfalls exist both in terms of OPEC+ production — the alliance of OPEC and several non-OPEC countries — pumping oil below the levels it promised to add to markets, and sector underinvestment in the U.S. and other countries in the wake of Covid-19 and governments’ pushes to switch to renewables. 

OPEC+ members with quotas were short of their production targets by 700,000 barrels per day in January, with co-leaders of the group Saudi Arabia and Russia also pumping below their quotas, according to S&P Global Platts. This happens despite pledging to gradually unwind record supply cuts.

These aren’t the only indicators of an ongoing bull run in oil. Investors are pouring money into oil-related stocks and multinational oil companies are making huge profits. Energy stocks are smart investments, as analysts suggest that the U.S. inflation rate has reached its highest level in over a decade. This inflation is being exacerbated by problems in global supply chains. It is not only affecting the price of gas, but it is also increasing costs for oil drillers, especially those working in the U.S. Shale patch. Service companies for oilfields have said they will pass on their increased costsProduces  

Driscoll explained that increasing the amount of oil consumption causes our reserve capacity to drop, but other indicators, such as money managers and non-commercials, are also visible. He added, “But you also see key indicators like money mangers, the noncommercials, pensions, piling in to oil markets.” The oil equity (like) has shown stellar results. BP, Shell, Total hitting recent highs.”  

The truth is that S&P 500 Energy Sector IndexIt has increased by more than half a percent year on year.

Driscoll isn’t alone in his bullish call — J.P. Morgan this month forecast oil as “likely to overshoot to $125” per barrel “on widening spare capacity risk premium.”

“Supply missteps are growing.” J.P. Morgan reported on February 11 that the market is beginning to recognize strained capacity. 

The Energy Information Administration lowered its OPEC estimates by 300,000. Barrels per day in February. The producer group has yet to show any sign that it will change its planned quota hikes of 400,000 barrels/day for 2022, despite repeated pleas from the U.S., others, and other countries, to reduce oil prices. 

“This underperformance comes at a critical juncture – and in our view, as other global producers falter, the combination of underinvestment within OPEC+ nations and post-pandemic rising oil demand (as highlighted by Kolanovic et. al. Analysts at J.P. Morgan stated that this will lead to an energy crisis.

These factors along with continued global recovery from the coronavirus-induced economic crash mean there’s very little in the way of prices continuing to shoot up – something that could trigger an economic recession, energy ministers warnedThis week, at the Cairo Egyps Oil Conference. RBC Capital Markets analysts believe that if the commodity’s prices rise, there will be a collapse in demand. 

Although we could be premature, our main thesis for next year (or longer, depending on whether the macro economic holds) is the oil cycle. “The price will rise until there is a demand for it,” Michael Tran (commodity and digital intelligence strategist, RBC Capital Markets) wrote Monday in an analyst note. This is simply too bullish.

Oil will hit $115 per barrel or more this summer, according to the bank. 

Tran stated that historically, the markets have led higher because of tightening products and high crude inventories. These problems are hard to fix without a demand destruction event, or an increase in supply, which Tran did not mention.