By Irina Slav • It seems that nearly everyone believes oil prices are only going to go higher from here, with OPEC+ refusing to change its plan and U.S. producers maintaining discipline • Citi is perhaps the one group that appears to see some downside for oil prices as it predicts higher U.S. production next year • Oil storage across the OECD was at the lowest level since 2015 and demand is only going to climb from here How much higher could oil prices go? This is the question that the U.S., China, India, and other big consumers have come to dread as benchmarks continue to rise amid tight supply and soaring demand. The answer right now is not one they will be happy with, either. “Net, our bullish view remains unchanged: the oil deficit remains unresolved, the current strength in oil demand remains a near-term tailwind and the increasingly structural nature of the deficits will require much higher long-dated oil prices,” Goldman Sachs analysts wrote in a note last week. The bank sees Brent crude ending the year at $90 per barrel and staying high over the next few years as well, averaging $85 per barrel. Analyst Damien Courvalin said last month that “We’re facing potential multi-year deficits and the risk of significantly higher prices.” Bank of America said earlier this month Brent crude could reach as much as $120 per barrel by the middle of next year. That’s a revision of another bullish forecast that saw Brent hitting $100 per barrel over the next six months. The reason for the revision: the now global energy crunch that has seen the prices for all fossil fuels, especially coal, skyrocket amid soaring demand. According to BofA, a recovery in jet fuel demand, higher diesel fuel demand, and constraints in the refining industry would all contribute to higher oil prices over the coming months. UBS is also bullish on oil, like pretty much everyone else. The Swiss bank’s strategists said in a note earlier this month that oil supply was falling short of demand, noting that oil in storage across the Organization for Economic Co-operation and Development was at the lowest since 2015, according to a Houston Chronicle report. The latest developments in OPEC also suggest oil has higher to go. On Friday, Saudi Arabia raised the December official selling price for its flagship Arab Light for Asia by $1.40 per barrel from November levels signaling expectations for the continued imbalance between demand and supply. It’s worth noting the Kingdom is raising prices even after Chinese oil imports fell in October precisely because of the international oil price rally. Imports were the lowest in three years, Reuters reported, as state-owned buyers found prices too high and independent refiners were constrained by lower import quotas. “We maintain the view that we have held all year – that the oil market remains in the early days of a multi-year, structurally strong cycle,” RBC analyst Michael Tran said in a note in mid-October. The reason seems to be the same as for all the bullish forecasts: fundamentals. “My advice to clients is that you want to stay long oil until you know where that equilibrium price is” that brings new supplies online, said Jeff Currie, the chief of commodities research at Goldman Sachs last month, as quoted by Bloomberg. “We know it’s above these levels because we haven’t had a big uptick in capex and investment.” The industry also sees oil higher for longer. Chron quoted the president of the Texas Independent Producers & Royalty Owners Association as saying he expected U.S. oil to reach $90 per barrel and stay there for at least a few months. Ed Longanecker cited low investment in new drilling, supply chain problems that are extending delivery times for equipment and materials, and continued strong demand among the factors determining this view. “Overall (oil) futures are likely to average somewhere in the $85-$87-per-barrel area through much of the winter, based on a potential colder than normal winter and inventories still below seasonal norms,” said the chief oil analyst of IHS Markit’s Oil Price Information Service. “A run toward $90 also seems to be in the cards.” One exception to the strongly bullish choir is perhaps Citi. While the bank’s commodity chief Ed Morse also expects higher prices this quarter, he also anticipates much stronger U.S. production of oil next year: U.S. production, Morse told Bloomberg last week, could grow by a lot more than any individual OPEC country in 2022. The price level of $90 per barrel seems to be the meeting point of many commodity analysts, at least for the immediate term. And with OPEC+ not coming to the rescue, such prices are fully possible. Even President Biden had to admit the cartel was not going to heed the request and later demands for more oil supply. “I’m not anticipating that OPEC would respond, that Russia and/or Saudi Arabia would respond,” Biden told media on Saturday, as quoted by Bloomberg. “They’re going to pump some more oil. Whether they pump enough oil is a different thing.” For now, chances are they will not pump enough to push prices lower, which means the upside potential remains significant, at least until the point is reached when prices begin to weigh on demand and it naturally declines, dragging prices with it.