Expectations for Brent crude to rise to $120 a barrel seem to be reverberating around the markets again. A complete ban by the EU on Russian oil could actually lead to such a scenario by creating supply bottlenecks and an energy scare.
During the beginning stages of the Russian invasion of Ukraine, the price of Brent shot up to $120 a barrel followed by gasoline prices on oil pumps. Energy Information Administration (EIA) documented retail gasoline prices, which reached $4.41 a gallon, March peak, which hasn’t been broken as of yet.
It seems as if no fast relief is to be expected if Andy Lipow of Lipow Oil Associates is correct. Speaking during an interview on CNBC, he stated:
“I don’t think there’s going to be a full ban. But I do think that the European Union is going to come to an agreement with Bulgaria, Czech Republic, Slovakia, and especially Hungaria.”
Consensus is key
As per Mr. Lipow, the above-mentioned four countries will probably have to be given an exemption on the Russian oil ban since they don’t possess the logistical capabilities to avoid Kremlin’s energy completely. So far, it seems as if the EU will continue to remove Russian energy from their territories, which could result in oil prices increasing.
On the other hand, the potential downside to Brent prices currently hinges on China and demand destruction there due to new Covid lockdowns imposed by the state. Based on the price action in oil in the previous weeks, it seems as if market participants are viewing the China issue as a transitory issue.
At the height of the Covid lockdowns in April 2020, with the demand for oil almost completely destroyed oil prices went into negative territory for the first time in their history.
It is unlikely that a similar scenario can be repeated any time soon; yet, there needs to be some downside risk to rising oil and energy princess across the globe. At the moment it is difficult to recognize what those risks could be, but it’s also highly unlikely that oil prices will continue to climb indefinitely.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
Source: https://finbold.com/heres-how-much-brent-crude-oil-could-rise-per-barrel-if-eu-bans-russian-oil/