Crude oil prices could be on track to hit $100 and even $120 per barrel, which calls for aggressive buying moves into the oil market now, Cole Smead, president and portfolio manager at Smead Capital Management, told BBN Bloomberg on Wednesday.
China’s underwhelming economic performance is as bad as it gets and still, oil prices have not fallen apart, Smead told BBN Bloomberg, arguing about his commodity strategy.
The weakness in China’s economy is not driving oil prices currently. The crucial factor for oil is the ongoing supply cuts, he added.
The supply side calls for faster price moves higher than the market has been probably expecting, according to Smead.
“There should be money being thrown around trying to take advantages because if we wait back to a $100 or $120 a barrel, I think people are going to feel ‘Gosh, I really missed that,” he told BBN Bloomberg.
So far this year, concerns about China’s economy have stopped any sustained oil price rallies in their tracks. The chances of a ‘soft landing’ in the United States have increased, analysts and the Fed say, but concerns continue about the need of more Fed hikes to fight inflation.
The Chinese weakness has made the market take a wait-and-see approach to find if China’s policies to revive its real estate sector and consumer confidence are yielding results. Market participants expect additional stimulus and other measures from China to put its economic growth and industrial production on track to meet the authorities’ 2023 targets.
At the same time, the supply cuts from the OPEC+ alliance have started to tighten the market, analysts say. The cuts from OPEC+ and Saudi Arabia, coupled with expected continued strength in demand, are set to result in inventory draws for the rest of the year, supporting oil prices, according to analysts and forecasting agencies.