Crude Oil Prices continue to rise this week. Brent Crude briefly rising above $100 per barrel the very first time since 2014. This was as Russia launched its invasion of Ukraine, and although prices slowed down a bit on Friday experts have warned that they could increase to over $130 amid the fallout from the conflict.
The price of oil is at or near the seven-year peak following two months of a rally, amid worries that the growing conflict with Russia and Ukraine could trigger severe disruptions to global supply.
As Russia started it’s offensive against Ukraine this week and Ukraine’s invasion began, the cost of European benchmark Brent Crude surged at $105 per barrel — up 47% from December 20 to the highest price since July 2014. U.S. benchmark West Texas Intermediate crude jumped 47% in the same period to reach $100 per barrel. Analysts are already advising that prices could increase even more.
Oil prices could be as high as $125 per barrel before the end of this summer according to a report in the note of Goldman Sachs analysts on Friday, who predict that conflict between Russia and Ukraine, in addition to “uncertainty regarding sanctions that could be imposed,” could create a “supply shock” in global energy markets, which are already in tight supply.
With the war set to disrupt global supplies, Brent Crude prices could “approach $130 per barrel by June” and that number “could be higher if other disturbances occur,” Louise Dickson, senior oil market analyst at Rystad Energy, makes the same argument in a recent report.
JPMorgan has recently forecast that, event that Russian natural gas and oil exports fall as a consequence of the conflict Brent Crude could average $115 per barrel over this second quarter, before dropping back to below $100 by the end of the year.
Oil prices slowed somewhat on Friday, however, in large part due to fact that the United States and other Western allies have so far not been able to confront Russia with tough energy sanctions, as it is the world’s second-largest oil producer as well as a major natural gas supplier for Europe.
“I do not want to claim that it’s not however it depends,” says Simon Wong, research analyst at Gabelli Funds. “Will the U.S. and Europe sanction Russian oil? Is there a coordinated reserve of strategic petroleum release by the U.S. and IEA if they do sanctions?” If Russian energy markets are sanctioned from the West and there is no coordinated release of reserves by the U.S. and its allies, “then $150 oil or even higher is not possible,” he says.
“The market for oil is extremely tight and could see wild swings when energy traders wait for the outcome for each of Russian and Iranian crude oil,” says Edward Moya who believes that oil prices could rise to up to $120 per barrel in the coming weeks.
The traders have also kept the latest developments in the possibility of a possible nuclear deal between the United States and Iran. If an agreement is reach which could result in the return of additional oil to world markets which is why Iran being estimate to have around 8 million barrels crude oil store in reserves. While JPMorgan analysts anticipate a drop in Russian exports of energy due to the growing conflict with Ukraine, they also think there is a chance that an Iran deal could come into success, which can be a way to offset the loss of supply. In this scenario, they see Brent Crude averaging $110 per barrel during the second quarter of the year and dropping to $90 at the year’s end in 2022.
