Oil could hit $380 a barrel in extreme scenario if Russia cuts production, says JPMorgan

Measure could be evaluated by Russians as retaliation for measures studied by the G7 against the country.

Brent oil prices could soar to “stratospheric” $380 a barrel in Russia’s “most extreme scenario” to cut oil production by 5 million barrels per day (bpd) in retaliation for a price cap considered by the Group of Seven , noted JPMorgan analysts. On Friday (1), Brent closed at around US$ 111 a barrel – that is, the advance would be around 242%.

Last week, the Group of Seven Economic Powers (G7) agreed to consider imposing a ban on transporting Russian oil sold above a certain price.

Aramco (publicity)

Brent oil prices could soar to “stratospheric” $380 a barrel in Russia’s “most extreme scenario” to cut oil production by 5 million barrels per day (bpd) in retaliation for a price cap considered by the Group of Seven , noted JPMorgan analysts. On Friday (1), Brent closed at around US$ 111 a barrel – that is, the advance would be around 242%.

Last week, the Group of Seven Economic Powers (G7) agreed to consider imposing a ban on transporting Russian oil sold above a certain price.

Such a ceiling would be a way to prevent Moscow from profiting from the invasion of Ukraine, which has dramatically raised energy prices, dampening Western efforts to reduce Russian oil and gas imports.

“A price cap of $50-60 per barrel would likely serve the G7’s goals of reducing oil revenues for Russia while ensuring barrels continue to flow,” the bank said.

However, the bank’s experts point out, “the most obvious and likely risk” is that Russia retaliates by reducing oil exports, they said, adding that Moscow could cut production by as much as 5 million barrels per day (bpd) “without unduly hurting the economy.” its economic interest”.

And they add: “it is likely that the government could retaliate by cutting production as a way of affecting the West. The tightening of the global oil market is on Russia’s side.”

“Given the high level of stress in the oil market, a 3 million bpd cut could cause the global Brent price to jump to $190/bbl, while in the worst-case scenario, a 5 million bpd cut could lead to the price of oil to a stratospheric $380/bbl,” said JP Morgan.

Russian Deputy Prime Minister Alexander Novak said last week that attempts to limit the price of Russian oil could lead to an imbalance in the market and drive prices higher.

JPMorgan also saw alternative scenarios where China and India do not cooperate with the G7 on the price cap, or one where Russia fully redirects exports from west to east but loses pricing power.

Source: infomoney