Oil prices, already at a seven-year high, could rise to $120 a barrel in the first quarter of 2022 if Russia attacks Ukraine and causes a supply shock, according to analysts at JPMorgan and Citibank.
Citibank analysts said oil prices could jump 10 percent if Russian military action hits Ukraine, a forecast in line with Goldman Sachs projections calling for prices of about $100 per barrel within the next three months. Brent crude oil was trading at $93.14 as of this writing.
In a worst-case scenario, oil flow disruptions from Russia could cut its oil exports in half, pushing up oil prices to $150 a barrel, according to JPMorgan analyst Natasha Kaneva.
The bank estimated such a jump would require a “sharp” cut of 2.3 million barrels a day in oil output, or roughly a 2 percent drop in total global supply.
Russia-Ukraine tensions have helped inflate oil prices in recent weeks. Brent oil briefly touched $95 a barrel during the trading session on Feb. 14, its highest level since 2014, amid a build-up of Russian forces on the Ukraine border.
On Feb. 13, White House National Security Advisor Jake Sullivan warned that an invasion could come any day now.
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“The latest geopolitical tensions between Russia and Ukraine raise the risk of a material spike this quarter,” wrote JPMorgan economists Joseph Lupton and Bruce Kasman in a research note.
“That this comes on the back of already elevated inflation, running at a multi-decade high last quarter, and a global economy that is being buffeted by yet another wave of the Covid-19 pandemic adds to the near-term fragility of what is otherwise a fundamentally strong recovery,” the economists added.
The impact of high oil prices would be more severe in countries that are dependent on imports such as India, Germany, and France. Their economies would be more adversely affected by a spike in oil to $120.
Russia is the world’s second-largest producer of both oil and natural gas after the U.S. in each category. It plays a key role in the Organization of the Petroleum Exporting Countries (OPEC).
OPEC has raised its monthly output target by 400,000 barrels per day recently but has repeatedly failed to achieve those increases.
Experts have pointed out that Russia is willing to incur “real financial harm” and an all-out war to achieve its political objectives in Ukraine.
Photo: In this photo provided by the Russian Defense Ministry Press Service on Feb. 14, 2022, Russian tanks roll on the field during military drills in Leningrad region, Russia. While the U.S. warns that Russia could invade Ukraine any day, the drumbeat of war is all but unheard in Moscow, where political experts and ordinary people alike don’t expect President Vladimir Putin to launch an attack on the ex-Soviet neighbor. (Russian Defense Ministry Press Service via AP, File)