Prices of oil continue to climb this week, with Brent crude briefly crossing 100 dollars per barrel, for the first time in 2014–as Russia launched its invasion of Ukraine Although prices fell on Friday, experts warn that it could increase to over $130 as a result of the conflict.
Prices for oil are near their seven-year-highs after an upswing of two months amid concerns that the escalating conflicts with Russia and Ukraine could trigger severe disruptions to supply in the world.
As Russia launched it’s attack on Ukraine in Ukraine on Wednesday and Ukraine’s invasion began, the cost of European benchmark Brent crude spiked to $105 per barrel, up 47% from the end of December to the highest since July 2014, while U.S. benchmark West Texas Intermediate crude surged 47% during the same period to reach $100 per barrel–with analysts today predicting that prices will increase even more.
The price of oil could rise to $125 per barrel this summer according to a report by Goldman Sachs analysts on Friday, who predict that the Ukraine-Russia conflict in addition to “uncertainty concerning sanctions that might be in place,” could create a “supply shock” on the world energy markets which are already in tight supply.
With the war set to jeopardize global supplies, Brent crude prices could “approach $130 per barrel by June” and that figure “could rise if further disruptions materialize,” Louise Dickson, senior oil market analyst at Rystad Energy, echoes this argument in a recent note.
JPMorgan recently predicted that if Russian oil and natural gas exports decline as a result from the conflict Brent crude may average $115 a barrel during the 2nd quarter in 2022, and then fall back below $100 by the close of the year.
The prices of oil slowed slightly on Friday, however, mostly due to the fact that the United States and other Western allies have been hesitant to hit Russia with tough energy sanctions due to the fact that it is the world’s second largest oil producer as well as a major natural gas producer for Europe.
“I don’t want to claim that it’s not however it is dependent,” says Simon Wong the research analyst at Gabelli Funds. “Will the U.S. and Europe sanction Russian oil? Do they plan to have a coordinated reserve of strategic petroleum release from the U.S. and IEA if they sanction?” If Russian energy markets are sanctioned from the West, and there is no coordinated strategic publication of reserves through the U.S. and its allies, “then $150 oil or even higher is not an out of the realm of possibility,” he says.
“The market for oil is very tight , and it is likely to have a volatile year when energy traders wait for the outcome regarding the both Russian and Iranian crude oil,” says Edward Moya, who thinks oil prices could go up to up to $120 per barrel within the next few weeks.
The traders have also been keeping the latest developments in the possibility of a possible nuclear deal with the United States and Iran. If an agreement is reached which could result in the return of more oil back into global markets, with Iran thought to have eight million barrels crude oil on reserve. Though JPMorgan analysts anticipate a drop in Russian energy exports due to the growing conflict with Ukraine however, they believe there is a chance that an Iran agreement will come to the table, which will be a way to offset the loss of supplies. In this scenario they predict Brent crude averaging $110 per barrel for the second quarter, and then falling to $90 by the end of 2022.