Oil prices are projected to soar to $100 per barrel by the end of the year due to a surge in China’s tourism sector and decreased supply from major oil producers, according to Gary Ross, the CEO of Black Gold Investors. Speaking at the Asia Pacific Petroleum Conference in Singapore, Ross highlighted the significant recovery in domestic and international flights in China. He noted that domestic flights have already reached 110% of pre-pandemic levels, while international flights have rebounded from near zero to approximately 75% of pre-pandemic levels.
Ross predicted a considerable increase in jet fuel demand in China, estimating it to be around 500,000 barrels per day. This surge in demand is primarily driven by the lifting of China’s ban on group travel to most destinations, which resulted in a sharp acceleration in tourism activities. Furthermore, road travel in China has also witnessed a notable uptick. As Chinese drivers tend to favor vehicles with conventional engines for longer trips, gasoline consumption is expected to increase significantly as well.
The CEO of Black Gold Investors emphasized the astonishing rise in gasoline sales during the summer, attributing it to people driving more frequently. He anticipates this upward trend to continue, leading to a substantial increase in gasoline demand in the fourth quarter of 2023.
Meanwhile, global oil supply has been constrained due to production cuts by major oil producers such as Russia, Saudi Arabia, and their OPEC+ allies. In July, crude oil shipments from Saudi Arabia reached their lowest level in almost two years. Consequently, the price of global benchmark Brent crude has surged by approximately 25% since late June, trading above $90 per barrel. Ross suggests that supply cuts may need to be halted once the Brent price reaches $100 per barrel.
The projected surge in oil prices is driven by the combination of increased jet fuel and gasoline consumption in China and limited global oil supply. These factors indicate a strong recovery in China’s tourism sector and heightened demand for oil, particularly in the fourth quarter of 2023.