How low can crude oil prices go?

As wild swings in crude oil continue to reverberate around the world, financial markets are divided: can the benchmark hit the $200/barrel mark?

Brent crude traded between $107 and $114 a barrel on Wednesday before settling near the lower end of the range, having largely remained in the triple digits since hitting a 14-year high of $139 on Wednesday. barrel in March.

Analysts have targets ranging from the early triple digits up to $185 a barrel.

Supply-side shocks emanating from the ongoing Russian-Ukrainian war – now in its 13th week – are keeping oil prices high.

concerns about a falling US inventories and shrinking supplies from Russia and Libya are supporting oil prices, although the International Monetary Fund’s 80 basis point cut in its global growth forecast has brought the rise under control.

JPMorgan sees the risk of Brent rising to $185 a barrel if the European Union moves quickly to impose a comprehensive and immediate ban on Russian oil, Bloomberg reported. “There wouldn’t be enough appetite or time to redirect barrels to China and India,” said analyst Natasha Kaneva, quoted by the report.

This contrasts sharply with HSBC Global Research’s forecast earlier this month. In its report dated April 11, the research house lowered its Brent forecast for the second quarter of 2022 to $106 a barrel.

Its longer-term assumptions remain unchanged at $95 per barrel in 2023 and $85 per barrel in 2024.

Here is an overview of the key factors currently impacting the oil market:

  • Drop in Russian supply
  • High prices hurt demand
  • Some easing of the release of strategic petroleum reserves
  • Hopes for increased US supply
  • OPEC+ continues to resist calls to ramp up production
  • Sugandha Sachdeva, vice president of commodity and currency research at Religare Broking, believes oil rates will likely experience increased volatility and remain vulnerable to any European Union embargo on Russian oil imports.

    “Prices would largely be governed by geopolitical developments in eastern Ukraine and whether Russia faces further international isolation,” she told CNBCTV18.com.

    Higher crude oil prices are a drag on countries like India, which meets the lion’s share of its oil needs through imports.

    She sees Brent initially testing $140/bbl and, on a convincing breakout, expects it to head towards $180/bbl in the medium-term outlook.

    ‘Chaos’

    Religare is of the view that although the trajectory of crude oil is skewed to the upside, there are also some downside risks. Sachdeva said oil markets are unlikely to be able to digest the loss of Russian oil.

    “It would create chaos. Outages from Libya have also accentuated the tight supply scenario. Traders and refiners have been looking for crude to replace Russian shipments since Russia’s invasion of Ukraine sparked international sanctions,” she added.

    Brent has been falling since mid-March amid bearish demand data from the United States and China, and the release of strategic reserves by the world’s largest economy.

    HSBC expects US production to increase by 1.2 million barrels per day in 2022, driven in particular by increased activity among private shale operators, although the industry is showing signs of logistical and labor constraints. -work.

    However, he added: “Even with higher US and OPEC+ supply and real signs of slowing demand growth, Russian losses mean we still see a modest supply shortfall in 2022.”


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    Felix J. Dixon