Brent crude futures broke the $90 threshold on Wednesday for the first time in almost eight years, pushing the already rampant recovery of oil after hitting a bump in April 2020. Short supply and the Russia-Ukraine tensions are playing a key part.
As reported by CNBC, Brent crude futures topped $90 —an increase of more than 2%— while the U.S. benchmark, West Texas Intermediate crude futures, jumped by more than 2% to $87.43 per barrel.
High crude prices might be around the corner due to potential sanctions on Russia if the Europe giant led by Vladimir Putin invades Ukraine.
CIBC Private Wealth’s Rebecca Babin said: “Each day that passes without a de-escalation, we could see more of a supporting bid to crude.”
In a note to clients, Goldman Sachs Group Inc (NYSE:GS) said supply troubles are unlikely, but the tight market means there could be an upside for the cost of energy.
“Commodity markets are increasingly vulnerable to disruptions, after a couple of years of historically low outages following the initial Covid shock,” the firm said.
According to analysts, fears about the continuity of supply derived from tensions in the Middle East, as well as lower-than-expected pumping by OPEC+, are among the main drivers of the price rise.
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Goldman Sachs also said: “Against the backdrop of the tightest inventory levels in decades, low spare capacity and a much less elastic shale sector, this points to the skew of large energy price moves shifting to the upside, reinforcing the case for a rising allocating to commodities in portfolios.”
In early January, the firm had said Brent crude could soar to $100 per barrel during the third quarter this year, “adding to a number of Wall Street firms calling for triple-digit oil,” CNBC reports.
According to Craig Erlam of Oanda, “Immediately it becomes a question how long we’ll be waiting for triple figures. It’s still unlikely that oil and gas will be used as a weapon anytime soon but if it was, it could lead to a serious surge in prices given how tight the markets are.”