2022/01/23

Earlier, Morgan Stanley analysts assumed that by the third quarter, oil could rise to $100 due to a reduction in its reserves and investments in the sector. JPMorgan called the situation around Ukraine another possible reason for the growth

Oil prices may rise significantly due to the situation around Ukraine, analysts at JPMorgan believe, Bloomberg reports. The company has simulated a situation in which the cost of a barrel of oil will reach $ 150.

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"The recent geopolitical tensions between Russia and Ukraine increase the risk of significant growth in this quarter," analysts say.

The situation on the Russian-Ukrainian border escalated at the end of last year, when materials about Russia's impending invasion of Ukraine began to appear in foreign media. After these publications, some Western politicians also started talking about possible Russian aggression. Moscow has repeatedly stated that it is not going to attack anyone.

If the oil price reaches this level, the global GDP growth rate in the first half of the year may decrease to 0.9% (growth is now expected at 4.1%), economists warn.

Inflation in this scenario could almost double to 7.2% instead of the projected 3%. This will force the central banks of the countries of the world to tighten their monetary policy even more.

"Turmoil in the oil market in the past has repeatedly caused a cyclical downturn [in the economy]," JPMorgan explained.

Analysts noted that they did not take into account in their forecast the impact of the military conflict between Russia and Ukraine, if it happens, on the financial market, as well as the consequences of possible US sanctions against Moscow, which may be imposed in the event of its "invasion" of a neighboring country.

Previous estimations by Morgan Stanley

Earlier, Morgan Stanley predicted the growth of Brent oil to $100 per barrel by the third quarter of this year (before that, the bank's experts assumed that oil would grow to only $90 by this time). Among the reasons for the possible growth, experts called a reduction in raw materials stocks and a projected decline in supply due to insufficient investment in the sector as environmental initiatives move forward.

On January 18, the price of a barrel of Brent oil reached $88 for the first time since October 2014. The next day, it rose to $89, but then fell to $87.9. Bloomberg attributed the rise in price to the aggravation of geopolitical tensions in the Middle East, in particular with the recent drone attack by Yemeni Houthis in Abu Dhabi (the UAE is the third largest oil producer in OPEC).

Michael Zippo
https://linkedin.com/in/michael-zippo-9136441b1
info@e-book.business

Sources: JP Morgan, RBC, Morgan Stanley

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