The price of Brent oil could reach as much as $150 with the ongoing war between Russia and Ukraine and the EU embargo on Russian oil imports, Malaysia-based oil and gas industry analytical and business intelligence platform Oil Industry Insight Founder Alahdal A. Hussein told Anadolu Agency in an exclusive interview.
EU leaders met on Monday to discuss a sixth sanctions package which included a partial ban on Russian oil. The meeting led to an agreement to cut 90% of oil imports from Russia by the end of 2022.
EU leaders agreed "that the sixth package of sanctions against Russia will cover crude oil as well as petroleum products delivered from Russia into member states, with a temporary exception for crude oil delivered by pipeline."
The embargo will cover seaborne oil and partially exempt pipeline oil, which Hungary will use to transport oil by the Southern Druzhba pipeline.
The ban will be finalized after agreeing on the technical details later in the week.
The price of Brent have already seen $120 per barrel on Tuesday opening after the decision was announced.
- Alternatives to Russian oil hard to find
"There will be no overnight replacement for Russian oil and gas. And if we assume that they closed their eyes and just went on with it despite all these challenges, then they will have to rely on Africa, Middle East, and USA to try to replace the Russian oil. That will lead to huge increase in oil prices," Hussein said.
He said that China and Asian countries will benefit from the ban as Russia will offer its oil at discounted rates in these markets to try to keep global market share.
"Oil prices are going to stay high as long as there is a war ongoing," he said and added that with the embargo, Brent hitting $150 is "not too far."
- Brent crude's trajectory pointing upward
Dr. Mamdouh G. Salameh, an international oil economist and Visiting Professor of Energy Economics at ESCP Europe Business School said that there was an the upward trend in prices even before the Ukraine conflict arrived on the scene.
He suggested that this increase was underpinned by a global oil market in its most bullish state since the oil price collapse of 2014 and a global oil demand in a super-cycle phase of accelerating demand growth which could last more than ten years.
Reiterating that Brent crude started to surge in January 2021 ending the year at $94-$95 and hitting $100 in January 2022, Salameh stressed the Ukraine conflict added a premium estimated $25-$30 to a barrel, but it has since fizzled out leaving oil prices to market forces.
Brent crude's current trajectory is pointing upward because the market is very tight with a shrinking global spare oil production capacity including OPEC+'s of no more than 2.0-2.5 million barrels a day (mbd), according to Salameh.
With the ban on imports, Brent could hit $130-140 a barrel, he warned.
- Volatility to continue
Christof Rühl, Senior Research Scholar at the Center on Global Energy Policy of Columbia University in the City of New York, stressed that oil prices are trending upward in the short-term but for the last few months have traded – with high volatility – a range approximately between $100 and $110.
The current situation is characterized by fears of a slowdown in global economic activity, including in China, and widening of oil sanctions against Russia by the European Union, Rühl said, adding that the former drags prices down and the latter drives them up, and this explains the zig-zag currently seen.
"I see this volatility continuing. There is also an important aspect often missed. There is a global mismatch on the product side – so product prices for gasoline and especially for diesel have increased by more than crude oil prices," he noted.
By Sibel Morrow
Anadolu Agency
energy@aa.com.tr