Chief Executive Officer (CEO) of Rystad Energy, Jarand Rystad, is of the view that oil prices could go as high as US$130 a barrel on account of Russia’s invasion of Ukraine on Thursday. In his most recent post on his LinkedIn page, the CEO said the tragedy of the situation cannot be underestimated since other implications of the conflict pale when compared to the potential human cost on both sides.
While he believes that a full-scale military conflict between Russia and The West is unlikely, Rystad said a deep economic war is almost inevitable. The CEO was keen to note that Russia cannot win such a war. He stressed however that it does have a major weapon to wield – oil and gas exports.
The CEO said, “Demand for oil and gas in The West is only rising, and a global energy crisis is likely to unfold…Already strained markets are becoming further stretched as significant oil and gas volumes are now at risk.”
He added, “The escalation immediately jeopardizes up to 1 million bpd of crude supplies that transit through Ukraine and the Black Sea, but the long-term disruptions could be far more significant.”
He said Rystad Energy’s simulations show that oil prices could surge to around US$130 per barrel, with consumers feeling the squeeze at the gas pump and in their power bills.
“The reality is that significantly higher prices are on the horizon in Europe and overseas,” he stated.
Further to this, Rystad said a complete halt to gas exports from Russia is highly unlikely, but gas piped through Ukraine – which represents 8% of European supply – is very much at risk. He was keen to note that Russian gas accounts for over 30% of Europe’s demand, and other potential supply sources are inadequately prepared to bridge the gap. On the other side, he opined that Russian gas exports bring in more than US$300 million for the Kremlin each day – revenues it cannot afford to lose.
With sanctions and worldwide condemnation on the rise against the invasion, Rystad said he will continue to closely follow the Russian-Ukraine situation and provide regular updates on the reactions of the market.
