Oil prices have been rising since the global economy began to recover from Covid-19. Now, while the United States warns that Russia may soon invade Ukraine, it is pushing even harder.
Brent crude futures, the global benchmark, rose above $96 a barrel on Monday, before falling slightly.
Prices, which are now near their highest level since 2014, could weigh on economic growth and make the world’s inflation problem even worse.
“No one can really read President Putin’s mind,” he told CNN UBS oil analyst Giovanni Staunovo.
“But a supply disruption as a result of the conflict between Russia and Ukraine could send oil above $100 a barrel for the first time in more than seven years.”
Russia is one of the world’s largest producers of oil and natural gas. Investors are concerned that the conflict with Ukraine could damage the region’s energy infrastructure and that sanctions on Russia by Western nations could affect the country’s exports.
There are also concerns that Putin could weaponize oil and gas exports to pressure Europe, which depends on Russia for its energy supplies.
The situation is especially delicate given the tension already in the oil markets. Demand for energy is rising as pandemic-era restrictions are lifted and travel resumes while inventories are depleted.
There was pressure on the Organization of Petroleum Exporting Countries and key allies like Russia, a group known as OPEC+, to increase supply.
But OPEC+ is already struggling to meet its stated goals.
“If the persistent gap between OPEC+ output and its target levels continues, supply tensions will increase, increasing the likelihood of further volatility and upward pressure on prices,” the International Energy Agency said in a report last week.
Saudi Arabia and the UAE could do more, but Staunovo thinks this is unlikely to happen unless the situation really escalates.
Last week, Natasha Kaneva, head of global commodities strategy at JPMorgan, said oil prices could “easily” soar to $120 a barrel if Russia’s oil exports are affected by tensions with Ukraine “in an context of low idle capacity in other regions”.
Why it matters: Higher oil prices can shock the economies of oil-intensive countries and hurt consumers’ already strained pockets.
The average price of a gallon of gasoline in the United States rose to nearly $3.49 on Monday, up from $3.31 a month ago and $2.51 this time last year.
“With inflation currently at multi-decade highs and uncertainty around the inflation outlook already unprecedented, the last thing the recovering global economy needs is another leg higher in energy prices,” said Janet Henry, economist- head of HSBC, to customers earlier this month.
There’s more: fears of a Russian invasion aren’t just roiling the oil market. Global equities also fell on Monday. The sale was sharpest in Europe, where Germany’s DAX is down 2.2% and France’s CAC 40 is down 2.3%.
Source: CNN Brasil
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