JPMorgan Says Crude Oil Could Hit $380 a Barrel on Russia Sanctions

JPMorgan, an American multinational investment bank and financial services, had said crude oil prices could hit $380 a barrel if the United States and European sanctions force Russia to retaliate by cutting crude oil output.

According to JPMorgan analysts, the plans of western nations to cap the price of Russian oil in a move to tighten the screws on Vladimir Putin for invading Ukraine may backfire given Moscow’s robust fiscal space. Meaning, Russia could drop its oil production by 5 million barrels without really damaging its economy and allow sanctions imposed by western nations to push crude oil to $380.

This, they said could lead to a disastrous outcome as a 3 million barrel cut on daily supplies is estimated to push London crude prices to $190 a barrel while the worst-case scenario of 5 million could force the world to start buying a barrel at $380.

“The most obvious and likely risk with a price cap is that Russia might choose not to participate and instead retaliate by reducing exports,” the analysts wrote. “It is likely that the government could retaliate by cutting output as a way to inflict pain on the West. The tightness of the global oil market is on Russia’s side.”

Meanwhile, on Monday Brent crude oil rose 55 cents, or 0.5%, to $113.2 a barrel at 2:09 pm Nigerian time after falling over $1 in early trade.

U.S. West Texas Intermediate (WTI) crude oil appreciated by 44 cents, or 0.4%, to $107.94 a barrel, after also falling $1 earlier.

“Oil fundamentals remain supportive. Strong time spreads point to a tight market and clearly OPEC is still struggling to hit its agreed output levels,” said Warren Patterson, head of commodity research at ING.

“The group appears to be battling to maintain current output levels, with production falling over June.”