The price of oil may rise to a “stratospheric” $380 per barrel if US and European sanctions lead Russia to reduce its crude supply in retaliation.
This was disclosed by JPMorgan analysts endorsed by Natasha Kaneva in a note to clients seen by Bloomberg.
Back story
- The Group of Seven (G7) leaders recently discussed a plan to cap the price of Russian oil in order to put pressure on Moscow, which is benefiting from rising energy prices, and cut off its sources of funding for the invasion of Ukraine, which prompted the note.
- A price exception could work through a mechanism to restrict or ban insurance or financing for Russian oil shipments above a certain amount. It could prevent spillover effects to low-income countries that are struggling with high food and energy costs.
- In order to accomplish this objective, the G7 needed the support of oil-exporting nations in the Organization of Petroleum Exporting Countries and its allies in a bloc known as OPEC+, which includes Russia.
- The European Union still plans to ban imports of most Russian oil from the end of the year. The US, United Kingdom, Canada and Japan will also ban Russian gold imports. France also supported the move.
What they are saying
JPMorgan warned that if US and European penalties prompt Russia to inflict retaliatory crude-output cuts
JPMorgan analysts stated in a note to clients that Moscow can afford to reduce daily crude production by 5 million barrels without significantly harming the economy given the country’s strong budgetary situation.
However, the outcomes might be terrible for a large portion of the remainder of the world. According to the analysts, a daily supply reduction of 3 million barrels would cause benchmark London crude prices to rise to $190, while a reduction of 5 million barrels would result in “stratospheric” prices of $380 a barrel.
“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.”
The O’Biden administration must allow the completion of the Keystone XL pipeline, and lift restrictions on drilling and fracking. America could sell oil to the world, and put an end to inflation in America.
Is there something wrong with your reading comprehension? This has nothing to do with Keystone. Keystone was never delivering usable oil to the United States. It was Canadian sludge passing through the United States on his way to be exported to China. This has nothing to do with Biden. This has everything to do with Russia and your buddy Trump making deals to lower production in the pandemic please get your head out of your ass
We are going Total Electric even if it won’t work. Foxtrot Juliet Bravo said. Your gas stove, hot water tank, and H/Vac has to be changed to electric along with your VERY expensive new car, which we don’t have chips, parts, or mechanics for.
The O’Biden administration must allow the completion of the Keystone XL pipeline, and lift restrictions on drilling and fracking. America could sell oil to the world, and put an end to inflation in America.
The US has been a net exporter for several years. Trump supporters never fail to demonstrate their complete lack of intellect or honesty.