Oil prices could surge 240% to $380 a barrel if Russia dramatically slashes production in response to Western plans to cap the country’s energy prices, JPMorgan has warned.
G7 leaders last week announced they were working on plans to cap the price of Russian oil to keep up the pressure on Moscow over its invasion of Ukraine.
JPMorgan’s analysts said in a note this weekend that Russia — one of the world’s key energy exporters — is in a relatively strong position thanks to the recent increase in oil and natural gas prices.
Moscow could retaliate against the G7 price cap and slash its oil production by as much as 5 million barrels per day without causing excessive damage to its economy, JPMorgan said.
“The most extreme scenario of a 5 million barrel per day slash in production could drive oil prices to a stratospheric $380 a barrel,” JPMorgan’s analysts, led by Natasha Kaneva, said in the note.
The estimate underlines the risks of tightening sanctions on Russia at a time when energy prices are soaring and causing major problems for Western politicians at home.
“Russia’s policymakers will likely address the challenge of the oil price cap from the position of strength,” JPMorgan’s analysts said. “Russia had already shown its willingness to withhold supplies of natural gas to EU countries that refused to meet payment demands.”
JPMorgan said the outlook was uncertain,m but a more likely outcome was that Russia cuts its output by 3 million barrels per day, which could push oil prices to $190 a barrel. Production stood at just over 10 million barrels a day in May, according to Moscow financial newspaper Vedomosti.
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