Bank of America says oil could top $100 per barrel if winter is colder than expected

Published Mon, Sep 13 202110:51 AM EDTUpdated Mon, Sep 13 202111:11 AM EDT

Oil could rally to $100 per barrel this winter if colder-than-expected temperatures push demand higher while supply remains tight, Bank of America said in a note to clients. Under this scenario, oil prices would hit triple digits six months ahead of the firm's base case, which has crude at $100 in the middle of 2022. The firm's call comes as oil's rally has stalled following a surge in the first half of the year. And while strategists led by Francisco Blanch see oil moving higher in 2022, the firm expects prices to remain rangebound for the rest of 2021. For the second half of 2021, Blanch sees Brent averaging $70 per barrel. On Monday, the international benchmark advanced 56 cents to trade at $73.48 per barrel for a gain of 0.8%. West Texas Intermediate crude futures , the U.S. oil benchmark, advanced 1.1% to $70.48 per barrel. "Weather is quickly becoming the most important driver of energy markets," Blanch wrote. He said global oil demand could jump between one million and two million barrels per day this winter, pushing the market into a larger deficit and driving up prices. "We now see upside risks for oil looming on 2021/22 winter weather risks as other energy prices like natural gas and coal keep pushing higher," he added. While prices have been range bound recently, WTI and Brent are up 46% and 42% for the year, respectively, as demand rebounded and producers kept supply in check. Output constraints in the Gulf of Mexico are also supporting prices as producers work to get operations back to normal. According to the latest data from the Bureau of Safety and Environmental Enforcement, about 50% — or around 884,000 barrels of oil per day — of production in the Gulf remains offline. "It will still take weeks to get back to normal production levels, in our view," Bank of America said. The firm added that while the Covid-19 delta variant remains an overhang in developing economies, consumption in European and emerging markets has rebounded "with a vengeance." Goldman Sachs, meanwhile, said Monday the oil market is poised to "rally significantly" in the fall, especially if the Iran nuclear deal falls apart. The firm sees Brent averaging $80 per barrel during the fourth quarter, with WTI at $77. Unlike Bank of America, however, Goldman believes the fourth quarter will be the high-water mark for oil, with prices retreating during the first three quarters of 2022. —CNBC's Michael Bloom contributed reporting.

Working oil pumps against a sunset sky.

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Oil could rally to $100 per barrel this winter if colder-than-expected temperatures push demand higher while supply remains tight, Bank of America said in a note to clients.