Why oil prices could be poised for a 'super spike': Analyst

Crude oil ( CL=F ) is trading near $100 a barrel, Brent ( BZ=F ) is around $110, and William Blair energy research analyst Neal Dingmann thinks the next move could be a "super spike."

"We could see a super spike like a lot of the CEOs of the majors have suggested," Dingmann told Yahoo Finance Senior Reporter Brooke DiPalma (video above). "Do I think that's possible? Absolutely."

Dingmann noted that oil executives keep telling him prices have a new, higher floor for at least the next several quarters, and he agrees: The midcycle price most analysts used to put at $70 to $80 a barrel is now "probably closer to 80 to 90," with periods above $100.

"You've had Iranian tanker attacks, you've had record freight cost," Dingmann explained. "It's really the underlying physical market that continues to get tighter and tighter."

The energy sector ( XLE ) is up more than 50% this year — the best of the S&P 500's ( ^GSPC ) 11 sectors and well ahead of the index's roughly 12% gain. US crude has climbed more than 70% since Dec. 31, and Brent, the global benchmark, is up about 80%.

Dingmann added that geopolitical and political events "have now caused actual physical events," and stopgaps will be hard to pull off: "It's going to be very difficult to try to release barrels from the SPR or other temporary fixes."

The Strategic Petroleum Reserve has already fallen to its lowest level since 1982.

And then there's diesel: Heating oil futures ( HO=F ), a benchmark for diesel, have more than doubled this year.

"I think we've already seen record highs and we're going to even see higher," Dingmann said, pointing to "diesel, gasoline, home heating fuels" as winter approaches.

That's bad news for consumers and good news for US oil producers, which Dingmann said "are just going to continue to print money." Most of the companies he covers reported record free cash flow in the second quarter, he said, and he expects new records in the third or fourth quarter.

Not everyone on Wall Street thinks oil is about to spike. Goldman Sachs on Monday raised its December target for Brent to $90 a barrel and $81 for US crude, both below where oil trades now. The bank sees Brent reaching $125 only if oil infrastructure is damaged, shipping attacks intensify, or the risk premium persists.

Internal AI tools helped analyze interview transcripts, research, and draft this post. Humans reviewed, edited, and fact-checked this post before publication.