Oil prices could ‘very easily’ top $100, says former US energy secretary

Oil prices could “very easily” hit $100 a barrel in the aftermath of the failed OPEC+ talks, former US Energy Secretary Dan Brouillette told CNBC, Report informs.

“You could very easily see oil hitting $100 a barrel — potentially even higher,” he said.

On the flip side, it’s “equally possible” that prices could collapse too.

“If there isn’t any agreement on production, and countries tend to go off and do their own thing, or do their own production, you could have a collapse of oil prices,” said Brouillette, who was US energy secretary from 2019 to 2021.

OPEC and its allies, referred to collectively as OPEC+, twice failed to reach a deal on oil output last week. On Monday, another attempt to resume talks broke down, and discussions were put off indefinitely.

The energy alliance, which includes Russia, had sought to increase supply by 400,000 barrels per day from August to December 2021 and proposed extending the duration of cuts until the end of 2022. Last year, to cope with lower demand due to the pandemic, OPEC+ agreed to curb output by almost 10 million barrels per day from May 2020 to the end of April 2022.

The United Arab Emirates had indicated that, while it was supportive of the proposal to increase supply, it objected to the terms of the extension.

Prices soared to three-year highs following the collapse of those talks on Monday. On Tuesday during Asia trading, they surged even higher. US crude pushed past $76 per barrel and international benchmark Brent was higher than $77 per barrel.

Oil prices topping $100 would destroy demand, warned oil expert Dan Yergin, who said that it would not be in the interest of countries.

“I think countries recognize that $100 barrel oil would not be in (their) interest,” Yergin, the vice chairman of IHS Markit, told CNBC. “You would see governments pour more incentives into electric cars, and see the impact on demand.”

OPEC+ is led by Saudi Arabia, a close ally of the UAE. But the breakdown of those talks, and UAE’s objection to the terms, reflect a rare public disagreement between the allies.

The discord between Saudi Arabia and the UAE has been “striking,” Brouillette and Yergin both said.

“I find it striking that the UAE has stepped away from Saudi Arabia, a longtime ally within OPEC and OPEC+,” Brouillette said.

Yergin, too, said the contention between both countries was striking, given that both countries until recently had “pretty much marched in lockstep.”

“I think that one side or the other is gonna have to give in … there’s going to have to be … a lot of, as they say, horse trading, to get to a deal and keep it together,” he told CNBC on Tuesday.

While they are on divergent paths in this matter, both actually have similar goals and require revenue from oil production for new investments, Brouillette pointed out.

Even though the U.S. is not a member of the OPEC oil cartel and is not expected to be negotiating the price of oil, it’s “important that we have a mediating force,” said Brouillette.

“The United States is one of the big three producers of the world, and it’s … important that we be at those conversations, and use the (Group of 20) and other forums that we have available to us, to bring in all of the world partners to hopefully mediate and mitigate some of the worst outcomes that can happen in these types of situations,” he suggested.

Brouillette also said to “keep a close eye on the Russians,” who lead the non-OPEC countries.