NYPPEX, one of the world's leading providers of secondary private equity liquidity, announced it expects Brent oil to exceed $100/barrel in 2022.
NYPPEX believes the Natural Resources sector is at the beginning stages of a 10-year secular trend characterized by higher prices for commodities driven by ongoing demand/supply imbalances.
Oil Price Forecast 2021-2050
The U.S. Energy Information Administration ("EIA") projects Brent oil will reach $134/barrel by 2040 as cheap oil sources will have been exhausted, making it more expensive to extract oil.
By 2050, the EIA projects Brent oil will reach $185/barrel.
In Europe, natural gas prices have increased over 300% in less than 1 year from approximately $1.75 in May 2020 to $5.35 in February 2021.
NYPPEX believes it is important to note that future oil prices will depend greatly on innovations in energy, government policies, transportation and other industry trends as societies work to become less fossil fuel dependent.
Factors Driving Oil Prices Today
NYPPEX believes that in the years before COVID, oil prices had a relatively predictable seasonal swing. In the spring, oil prices typically increased based on expectations for greater summer vacation driving. Once demand peaked, prices dropped in the fall and winter.
NYPPEX believes that today, oil prices are more volatile, and driven by the following factors:
1. Decline in U.S. Oil Supply
NYPPEX believes that COVID, natural events and government policies have adversely affected U.S. oil supply. For example, the U.S. experienced a decline in oil production following Hurricane Ida in September 2021 which forced the shutdown of more than 9 U.S. refineries.
2. Decline in OPEC Oil Supply
In 2020, the Organization of Petroleum Exporting Countries ("OPEC") cut oil production due to lower demand during the COVID pandemic. OPEC has gradually increased oil output through 2021.
3. Asian & European Countries Increase Oil Purchases
NYPPEX believes that Asian countries typically relied on coal to generate power. However, recent coal shortages have caused some Asian countries to significantly increase their purchases of natural gas and oil.
In China, electricity shortfalls caused by high coal prices has led local officials to curtail hours at some factories, affecting the production of semiconductors and other key exports.
On Friday, October 15, 2021, Brent oil, the global benchmark, topped $85/barrel, its highest level in 3 years.
4. Decline in Global Oil Inventories
NYPPEX believes that due to the above factors, more countries are being forced to draw down their oil reserves.
NYPPEX believes that given current trends in the Natural Resources sector, this may be an opportune time for alternative fund investors to evaluate their portfolio allocations to Renewables, Metals & Mining, Infrastructure, Real Assets, Growth and Energy.
