- Oil prices could climb as high as $150 a barrel if Russian supplies cannot be replaced, a Truist analyst said.
- Major oil producers like the United States and OPEC have no spare capacity to further increase production, Neal Dingmann said.
- “The only real spare capacity, unfortunately there, before all the problems, was in Russia,” he said.
The recent drop in oil is temporary and prices could rise above $150 a barrel if Russian crude cannot be replaced, an analyst at Truist said.
The European Union is phasing in an embargo on Russian oil that will take full effect later this year, while G7 leaders discussed a proposal to impose a price cap. Some industry experts have warned such moves could drive millions of barrels off the market as Russia seeks to retaliate by triggering a price spike.
“I think a lot of that, especially for oil, is going to come back to Russia,” said Neal Dingmann, managing director of energy research at Truist. Yahoo Finance Live tuesday. “And I think you’re going to see supply shaken up, if not at the end of the year, if not before. I think that has the potential to push oil prices even higher than what we just saw there. a few months ago.”
On Wednesday, West Texas Intermediate prices were at $96.25 a barrel and Brent crude at $99.61, slipping below $100 in recent weeks after jumping above $120 shortly after the invasion of Ukraine by Russia.
When asked about oil’s upside potential, Dingmann said “well above $150,” noting that there was almost no available capacity among OPEC+ members or United States to produce more oil.
“Russian capacity is disconnected, and I think you’re seeing a potentially 50% higher spike before the end of the year,” he warned.
Major suppliers are already struggling to keep up with demand, with OPEC below its production quotas in June, Reuters reported.
“Between the United States and OPEC+, there is no spare capacity,” Dingmann said. “The only real spare capacity, unfortunately there, before all the problems, was in Russia.”
President Biden is expected to visit Saudi Arabia later this week and urge OPEC’s factor chief to increase oil production. But Dingman is skeptical whether the trip will lead to increases.
“I think it’s pretty much a fruitless journey,” he said. “Almost all OPEC+ members would produce more right now if they could.”