-According to Rystad Energy’s head of oil markets, oil prices could double to $240 a barrel by summer.
-Bjørnar Tonhaugen said western energy embargoes against Russia will continue to drive up prices.
-He predicted that this could lead to a global recession and the worst oil crisis since the 1990 Gulf War.
World (Times Of Ocean)- Oil to $240: Leading commodities analyst explains why oil prices could double by summer – and predicts that this nightmare scenario will trigger a stock market crisis and lead to global recession.
As a result of Russia’s invasion of Ukraine, crude oil prices have surged – but a commodities analyst at an energy research company warns that the increase is not over yet.
“Oil prices could hit $240 a barrel this summer,” Rystad Energy’s head of oil markets Bjørnar Tonhaugen said in a recent research note. “This is the largest energy crisis in decades and the impact on the world’s most important commodity is going to be unprecedented.”
The Insider explains Tonhaugen’s latest oil price outlook – and his warning that there could be a global recession if crude hits $240 a barrel.
Oil price outlook
The US president Joe Biden announced a ban on Russian oil and gas exports on Tuesday, which Bank of America predicted could push crude prices to an all-time high of $200. Those sanctions are likely to cause prices to rise, according to Tonhaugen.
“Market volatility is at an all-time high, with prices surging on the expectation that supply will further tighten due to restrictive sanctions on Russian energy from the West,” he said. “If more Western countries join the US and impose oil embargoes on Russia, it would create a 4.3 million barrels per day hole in the market that simply cannot be quickly replaced by other sources of supply.”
Russia accounts for roughly 10% of global oil production, according to the International Energy Agency, and is the world’s third-largest oil producer after the United States and Saudi Arabia.
Tonhaugen’s price analysis said that cutting Russia out of the global oil trade would lead to a shortfall in supply that could push prices up to $240 a barrel – more than double the $107 price level Friday.
“Oil prices will continue to rise until they reach an unsustainable level that curtails demand,” Tonhaugen said. “That threshold could potentially be as much as $240 per barrel.”
Inflation, which is already at a four-decade high of 7.9%, would soar even more with such a spike. At the gas pump, ordinary Americans are likely to feel the impact of ‘Putin’s price hike’ later this year, Biden warned.
Tonhaugen warned that it could also hit the global economy and cause a recession.
“Although fortunately not the most likely scenario, traders, analysts and decision-makers alike should prepare for elevated prices based on the current landscape,” he said. “The higher prices go, the larger the chances of the global economy entering a recession already in the fourth quarter of 2022.”
Recessions are periods of economic contraction over a period of two consecutive quarters. It is based on changes in gross domestic product and a number of other monthly indicators, such as unemployment.
Tonhaugen isn’t the only one concerned about that scenario right now. Insider recently cited seven prominent strategists who have also expressed recession fears.
Tonhaugen remarked that this is already the worst oil crisis since 1990.
Iraq invaded Kuwait in 1991, disrupting their combined daily supply of more than 4 million barrels of oil. The price of oil rose from $21 a barrel to $46 a barrel in just three months.
“Prices may again double in the coming months if all western exports of Russian-associated crude is either embargoed, shunned or by other means needs to be replaced,” Tonhaugen said. “[It is] the worst potential crisis for the oil market since the 1990 Kuwait invasion by Iraq.”