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Analysts at Fitch Solutions Country Risk and Industry Research are holding on to their current forecast for Brent crude prices to average $82 per barrel this year.
That’s according to a new research note sent to Rigzone on Friday, which highlighted that the analysts noted that the balance of risk lies “squarely to the upside”.
“Prices rallied on the news that the U.S. was banning all imports of Russian crude, with the UK also pledging to phase them out over time. Major buyers in the EU and Asia have yet to follow suit, although a number of companies are ‘self-sanctioning’ – refusing to take up cargoes from Russia, aside from those under existing long-term contracts,” the analysts stated in the note.
“Prices will likely stay elevated in the near term, with widening sanctions posing meaningful upside risk to our outlook. OPEC+ could step in to help offset supplies lost from Russia, as the UAE has advocated for. However, Russia’s involvement in the group complicates the issue and OPEC lacks the capacity to offset Russian exports in full,” the analysts added in the note.
“We do expect to see higher volumes from Iran over the coming months, assuming an agreement on the nuclear deal can be reached, and this, combined with mounting demand destruction, should help temper oil prices,” the analysts continued.
In a separate note sent to Rigzone on Thursday, Bill Farren-Price, the director of Enverus Intelligence Research and lead author of a new report by the company, said, “if Russian oil is formally sanctioned, our central scenario sees crude exports to OECD countries fall by around three million barrels per day and products decline by 1.5 million barrels per day”.
“If China and others make up around 1.5 million barrels per day of that amount, this would leave a net export/supply loss of around three million barrels per day, which we think would drive Brent above $160 before a violent demand response sets in later this year,” he added.
Al Salazar, co-author of the new Enverus Intelligence Research report and senior vice president of the company, said, “inflation will bump even higher as Russian energy, base and rare metals, and agricultural commodities go absent from global markets”.
“Prices for oil, natural gas, food and metals are testing historic highs. Despite pockets of pent-up demand strength due to the global easing of Covid-19 restrictions, high commodity prices will soon start to erode demand strength,” he added.
Last week, Rystad Energy’s head of oil markets, Bjørnar Tonhaugen, warned that oil prices could hit $240 per barrel this summer in the worst-case scenario if Western countries roll out sanctions on Russia’s oil exports en masse. In a briefing note sent to Rigzone on March 4, Goldman Sachs outlined that if traders continue to resist buying Russian oil, or if energy sanctions materialize, crude prices could increase to as much as $150 per barrel in the coming months.
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