Jefferies says oil could soar to $150 a barrel in a fully reopened world, despite current Omicron slump

• Oil prices could rise as high as $150 a barrel in a fully reopened world, according to Jefferies.
• Strategist Christopher Wood said supply constraints are likely to push prices up, given underinvestment in oil infrastructure.

Jefferies strategist Christopher Wood has said oil could hit $150 if economies return fully to normal from the pandemic, as rising demand for fossil fuels runs into a supply squeeze.

"In a world that really reopens — which is a big 'if' — the oil price can go significantly higher," Wood told CNBC on Wednesday.

"In a really fully reopened world, the oil price could go to $150 dollars, because the supply constraints are dramatic."

Wood, the investment bank's global head of equity strategy, noted that energy companies have pulled back from investing in production of fossil fuels, even as demand for the likes of oil, gas and coal remains robust.

That underinvestment is leading to tighter supply, he argued, which will likely add to upward pressure on crude prices if economies return to normal in the coming years.

"The oil price is going to go higher in a fully reopened world because nobody's investing in oil. But the world still consumes fossil fuels," he said.

He said a "political attack" on fossil fuels has led to falling investment.

Institutional investors such as pensions have put pressure on companies, including energy giants, to reduce their involvement in fossil fuel use to help tackle climate change. Meanwhile, regulators are working on measures to achieve the same aim.

But that pressure to stop the development of new oil, gas and coal fields has had the effect of keeping demand in place during the transition to greener sources.

Oil prices have fallen sharply in recent days, after the discovery of the new Omicron coronavirus variant. Fears it may be resistant to current vaccines have caused some governments to impose travel bans and raised the prospect of tough new lockdowns.

"To me, the only thing that's really gonna knock the oil price down is new lockdowns in the Western world, which is why oil corrected when we saw the news about the new variant," Wood said.

Brent crude was up 2.99% to $68.20 a barrel Wednesday, after falling the prior day, but was well off a recent high of around $85. WTI crude was up 3.23% to $68.32 a barrel.

Earlier this week, JPMorgan analysts said oil could hit $150 a barrel by 2023.

They said OPEC's control over prices is likely to be a key factor driving up prices in the coming years. OPEC — a group of major oil producing countries — works with the likes of Russia and other non-members to agree on supply flows.

The Wall Street bank said it expects OPEC to "defend the oil price with paced volume growth to keep inventories low, markets in balance, and reservoirs well managed."

Oil prices crashed in the spring of 2020 as the coronavirus pandemic started to shake the global economy. But they have risen sharply in 2021 as demand has recovered, and OPEC has kept a lid on supply.