‘Global oil prices could reach $380 a barrel’

WASHINGTON: Analysts at JP Morgan Chase warned that global oil prices could reach a “stratospheric” $380 a barrel if the US and European sanctions lead Russia to enact retaliatory supply restrictions, Bloomberg reported.

Earlier, the Group of Seven nations decided to investigate the possibility of imposing a price ceiling on Russian oil in a bid to tighten the screws on Vladimir Putin’s war machine in Ukraine. "But given Moscow’s robust fiscal position, the nation can afford to slash daily crude production by 5 million barrels without excessively damaging the economy," the report said quoting JP Morgan analysts' note to clients on the likely scenario.

The report highlighted that the development could have much graver consequences for the world as a 3 million-barrel cut to daily supplies would push benchmark London crude prices

to $190.

In the worst-case scenario of a 5-million barrel cut, crude could reach “stratospheric” $380 a barrel, the analysts wrote to its clients.

“The most obvious and likely risk with a price cap is that Russia might choose not to participate and instead retaliate by reducing exports,” the analysts wrote. “It is likely that the government could retaliate by cutting output as a way to inflict pain on the West. The tightness of the global oil market is on Russia’s side.” Oil prices rose about 3 percent on Friday (1 July), recouping most of the previous session’s declines, as supply outages in Libya and expected shutdowns in Norway outweighed expectations that an economic slowdown could dent demand.

Brent crude futures were up $3.03, or 2.8 percent, at $112.06 a barrel by 1157 GMT, having dropped to $108.03 a barrel earlier in the session. WTI crude futures gained $2.84, or 2.7 percent, to $108.60 a barrel, after retreating to $104.56 a barrel earlier.

Both contracts fell around 3 percent on Thursday, ending the month lower for the first time since November. We “still see risks to prices as skewed to the upside on tight inventories, limited spare capacity and muted non-OPEC+ supply response,” Barclays said in a note.

On Thursday, the OPEC+ group of producers, including Russia, agreed to stick to its output strategy after two days of meetings. However, the producer club avoided discussing policy from September onwards.