JPMorgan Chase & Co. analysts cautioned that international oil prices might rise to a “stratospheric” $380 per barrel if US and European sanctions lead Russia to reduce its crude output in retaliation.
In an effort to put more pressure on Vladimir Putin’s war machine in Ukraine, the Group of 7 countries are negotiating a complex mechanism to control the price at which Russian oil can be sold.
According to the report, which cited a note to clients from JPMorgan analysts on the likely scenario, “but given Moscow’s excellent budgetary position, the nation can afford to decrease daily crude production by 5 million barrels without significantly harming the economy.”
3 percent increase in global oil prices due to supply disruptions
According to the research, the move might have serious global consequences because a daily supply reduction of 3 million barrels would cause benchmark London crude prices to rise to $190.
Crude may hit a “stratospheric” $380 in the worst-case scenario of a 5-million barrel decrease, the analysts warned their clients.
The analysts stated that the “most obvious and probable danger with a price restriction is that Russia might opt not to join and instead take retaliatory action by decreasing exports.”
It’s possible that the government will respond by reducing output in order to hurt the West. Russia benefits from the world’s oil market’s tightness.
On Friday, 1 July, the price of oil increased by almost 3%. As supply disruptions in Libya and anticipated shutdowns in Norway exceeded predictions that an economic slowdown could result in decreased demand, this restored the majority of the value lost in the previous session.