$150 Oil Could Still Happen. Here's How.

$150 oil could still happen, BofA Global Research indicated in a new report sent to Rigzone this week.

In the report, BofA Global Research outlined that it sees Brent averaging $102 per barrel this year and in 2023 and highlighted that a potential spike to $150 per barrel could happen if European sanctions push Russian oil production below nine million barrels per day.

“Yet the market does not seem to be pricing in a decade-long Russian supply crisis, as long dated oil prices have stayed firmly anchored in our long-term oil price band of $60 to $80 per barrel oil,” BofA Global Research noted in the report.

“Thus, extended sanctions on Russian energy could act as a price floor even if near-dated spot oil price downside risks grow. Even if the world goes into recession, we estimate Brent could average more than $75 per barrel in 2023,” BofA Global Research added.

In the report, BofA Global Research noted that it still assumes no recession, yet, although added that economic growth is constrained by limited energy output, fuel prices are rising, and central banks are hiking interest rates to slow down growth across the broader economy.

“Surging inflationary pressures from food to energy to services, coupled with fast paced interest rate hikes, suggest oil demand will struggle to fully recover to pre-pandemic levels until next year,” BofA Global Research stated in the report.

“The geopolitics (Russia’s Ukraine invasion) behind today’s massive refinery bottleneck are paving the way for a huge U.S. energy (SPR release, export limits), U.S. foreign (Saudi visit), and U.S. monetary (75bps hikes) policy response,” BofA Global Research added.

“How will oil demand destruction play out? Given the strength of the USD, large energy importers such as India, Turkey, South Africa, Japan, Germany or Spain are at the greatest risk of a demand contraction,” the company continued.

BofA Global Research said in the report that, if Russian oil supply does not drop below 10 million barrels per day, global oil demand could grow by 1.7 million barrels per day in 2023. According to a production table accompanying a statement about the latest OPEC+ meeting, which was posted on OPEC’s website on June 2, Russia’s “required production” for July 2022 is 10.83 million barrels per day.

At the time of writing, the price of Brent crude oil stood at $109.11 per barrel. The commodity’s highest close in 2022 so far has been $127.98, which was seen on March 8.

To contact the author, email andreas.exarheas@rigzone.com