Coming up to the expectations of the analysts and think-tanks, OPEC crude oil today hit $123 per barrel benchmark although the Brent and WTI crude oil lost a significant value in last two trading sessions.
OPEC crude oil was trading around $110 a barrel when the European Union announced its decision of slapping a ban on Russian oil imports two days ago.
Thus, in last two days, OPEC crude oil price has witnessed a robust growth, hitting $123/barrel on Thursday morning. The Brent crude fell to $114.50 per barrel, from $123/barrel two days ago while WTI oil has dropped to $113. Why the OPEC oil has suddenly started hitting record high price levels from the day the EU announced its decision? It is general perception in the market that the demand of OPEC oil would further increase globally and it is another golden chance for Oildoms in Arab countries to mint more dollars.
In nutshell, the wrong decision of the European Union has led to further unwanted increase in oil and gas prices at a time when the world is already experiencing super-cycle.
Meanwhile, in the prevailing scenario, noted economists believe that the international crude oil prices would soon hit the record breaking level of $150 per barrel in coming weeks in the backdrop of European Union (EU) decision to ban oil imports from Russia. In next few days, crude oil would hit $130/barrel record level, then it will move forward towards $150/barrel benchmark.
As the EU announced its decision on May 31, the international crude oil prices witnessed growth the same day. For example, the Brent crude surged to above $117/barrel while OPEC oil crossed $120/barrel on June 1, 2022.
Bank of America’s head of global commodities and derivatives research Francisco Blanch warned of a global recession like 2008 because of very high oil prices.
“Can the global economy continue to expand with tightening oil supplies? Our estimates suggest that the world can handle a total disruption of just about 2mn b/d of Russian oil without risking a global recession,” Blanch cautioned.
In 2023, BoA sees oil demand approaching pre-Covid levels—but only if Russia’s crude oil and condensate production stays at 10 million bpd (barrel per day) and OPEC+’s crude oil output increases.
Blanch stressed that while recession risks were elevated, it was not the base case. Blanch’s prediction, however, was made prior to the EU’s deal that it recently struck to embargo 90% of the crude oil that it currently gets from Russia starting the end of this year.
Some industry experts expect the partial EU ban on Russian imports to send oil prices to above $130 a barrel in the short term.
GDP has typically been measured by looking at the number of cars sold or air travel. But, Blanch says, “No major economy can expand without energy. Whether the source of this energy is thermal or renewable matters less, in our view, as long as it is available.”
Blanch also said that while the U.S. is unlikely to fall into a recession due to high energy prices, other countries may be more at risk.
