Oil prices have continued to rise this week. Brent crude briefly rising above $100 per barrel in the very first instance since 2014, as Russia declared war on Ukraine, and although prices slowed down a bit on Friday however, experts warn that they could reach more than $130 amid the fallout from the conflict.
Prices of oil are hovering near their seven-year-highs after a two-month rally amid fears that the escalating war between Russia and Ukraine will cause severe disruptions in supply across the globe.
As Russia began their offensive against Ukraine on Thursday as Ukraine was invaded by Russia, the price of European benchmark Brent crude shot up to $105 per barrel – up 47% since December 20 up to its highest level since July 2014. U.S. benchmark West Texas Intermediate crude surged 47% over the same time period, reaching $100 per barrel. Analysts are already advising that prices could climb even higher.
Oil prices could be as high as $125 per barrel this summer, according to a note in the note of Goldman Sachs analysts on Friday and who forecast that the conflict between Russia and Ukraine, as well as “uncertainty regarding sanctions that could be imposed,” could create a “supply shock” in the global energy market which are already in tight supply.
With the conflict set to jeopardize global supplies, Brent crude prices could “approach $130 per barrel by June” and that number “could soar higher if additional disruptions materialize,” Louise Dickson, senior oil market analyst at Rystad Energy, echoes this argument in a recent report.
JPMorgan has recently forecast that, If Russian oil and natural gas exports decrease as a result of the war, Brent crude could average $115 per barrel during the first quarter of 2022 then dropping to less than $100 at the end of the year.
The prices of oil slowed slightly on Friday, but most likely due to the fact that United States and other Western allies have avoided threatening Russia with tough energy sanctions since Russia is the second-largest oil producer, and also a major natural gas provider for Europe.
“I am not going to claim that it’s not but it really depends,” says Simon Wong Research analyst at Gabelli Funds. “Will you see the U.S. and Europe sanction Russian oil? Are there plans for a coordinated strategic petroleum reserve publication by U.S. and IEA if they approve?” If Russian energy markets are sanctioned in the West, and there is no coordinated release of reserves by the U.S. and its allies, “then $150 oil or even more is not an out of the realm of possibility,” he says.
“The oil market remains extremely tight and is likely to witness a wildly fluctuating market as traders in the energy sector wait for results regarding as well Russian as well as Iranian crude oil supplies,” says Edward Moya who believes that oil prices could reach around $120 per barrel within the next few weeks.
WHAT TO WATCH FOR:
Traders have also been keeping the latest developments in an upcoming nuclear deal in the United States and Iran. If a deal can be reached and signed, it could mean more oil back to global markets, with Iran being estimated to have around 80 million barrels of oil reserves. Even though JPMorgan analysts forecast a slowdown in Russian exports of energy due the intensifying conflict with Ukraine They also believe the possibility of an Iran agreement could come to realization, which would assist in replacing the lost supply. In the best case scenario, they see Brent crude averaging $110 per barrel during the second quarter, and then falling to $90 by the close of 2022.