JPMorgan Chase & Co. analysts warn that global oil prices could rise to a “stratospheric $380 per barrel” if sanctions from the US and Europe prompt Russia to inflict retaliatory crude output cuts.
In an effort to crack down on Vladimir Putin’s war machine, the Group of Seven nations have devised a complex mechanism to limit the oil price that Russian oil fetches.
JPMorgan analysts Natasha Kaneva said that Russia’s strong fiscal position means the nation can cut daily crude production by 5,000,000 barrels without causing economic damage.
The results could prove disastrous for much of the rest of the world. Analysts wrote that a 3 million-barrel reduction in daily crude oil supplies would drive benchmark London crude prices up to $190.
A worst-case scenario, which could see crude prices rise to $380 per barrel, could lead to a “stratospheric,” $380 crude.
Analysts wrote that Russia could choose to not participate in a price cap and instead respond by cutting exports.
It is possible that the government will retaliate by cutting production to inflict more pain on the West. Russia is benefiting from the tightness in the global oil market.
