Bank of America believes oil could spike above $100 before this cycle plays out

Published Fri, Jun 4 202112:05 PM EDTUpdated Fri, Jun 4 20211:48 PM EDT

Oil prices are up around 80% over the last year amid a recovery in demand and record production cuts from producers, and Bank of America says the rally isn't slowing down anytime soon. The firm said Friday that oil can climb all the way to $100 per barrel "before this story plays out." Underpinning Bank of America's bullish outlook is accelerating demand and the "risk that a supply/demand imbalance skews quickly towards a tighter market." On Friday WTI gained 0.7% to trade at $69.26 per barrel, after rising to $69.76 earlier in the session, which is the highest since October 2018. Brent crude advanced 28 cents to $71.59 per barrel. "We remain constructive on the US oils, with the view that prospects of an extended recovery is only beginning to be reflected in valuations in our view," the firm said. Bank of America's technical analysis team is even more bullish, saying the charts show a "very real possibility" that WTI advances to $175 per barrel during this cycle. The firm pointed to tightening supply just as demand rises as conditions that will support an upswing in prices. Earlier this week OPEC and its allies agreed to modestly increase production in July, based on levels agreed upon in April. This was largely expected by the market, but the group opted not to raise production further given that improving demand outlook pushed WTI and Brent to multiyear highs. The idea of $100 oil was virtually unthinkable just over a year ago, when WTI futures plunged into negative territory for the first time on record. Oil prices cratered as the coronavirus pandemic took hold, shutting down economies worldwide. Following the decline, OPEC+ implemented historic production cuts of nearly 10 million barrels per day, with other countries also scaling back production. "Importantly, the catalysts for global mobility improvements are still ahead, vaccinations, return of air travel, and a general shift back to office working to name a few. In simple terms, Brent has broken $70, but the fundamentals do not point to any material loosening of the oil market any time soon," Bank of America said. Amid this bullish outlook, the firm said Marathon Petroleum is its top refining pick. The firm also holds buy ratings on shares of Valero Energy and Phillips 66 . Elsewhere in the oil patch, the firm likes Exxon , Chevron and ConocoPhillips , among others. - CNBC's Michael Bloom contributed reporting.

The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas.

Angus Mordant | Reuters

Oil prices are up around 80% over the last year amid a recovery in demand and record production cuts from producers, and Bank of America says the rally isn't slowing down anytime soon.

The firm said Friday that oil can climb all the way to $100 per barrel "before this story plays out." Underpinning Bank of America's bullish outlook is accelerating demand and the "risk that a supply/demand imbalance skews quickly towards a tighter market."