‘Off the charts spike’: how high could oil prices rise?
US crude hits seven-year high as Opec+ resists pressure to ramp up production
Oil prices have soared this week after the world’s major producers decided to keep a cap on crude supply.
The expanded Opec+ cartel, which includes members of the Organization of the Petroleum Exporting Countries (Opec) and non-members such as Russia, said on Monday that it would stick with a plan of only gradually increasing oil production by 400,000 barrels a day each month. This is despite warnings of a growing deficit between supply and demand, the FT said.
This morning the oil price hit a “multi-year high” of more than $83 a barrel, Reuters reported. Brent crude rose as high as $83.47, the highest since October 2018, while US crude climbed to $79.78, the highest since November 2014.
Stephen Brennock, of oil broker PVM, said “an energy crisis is unfolding with winter in the northern hemisphere still to begin” and sets the stage for “even higher oil prices”.
The recent surge in the oil price is making investors “jittery”, The Guardian reported. Think Markets’s Naeem Aslam said Monday’s Opec meeting “only exacerbated the issue” and the cartel “may be pushed into a corner if demand continues to rise, leaving no option but to ramp up production”.
Opec’s decision also threatens to “raise tensions” between large energy consumers such as the US, Europe and China, the FT added. It’s feared that energy cost inflation could “derail their economic recovery”.
How high could oil prices go?
With winter approaching and Opec+ deciding to stick to its pact on output, oil prices could experience an “off the charts spike”, CNBC reported. John Driscoll, chief strategist at JTD Energy Services, told the broadcaster’s Squawk Box Asia show that “given all the uncertainty over weather and climate change, we could be in for a wild ride here”.
The US government’s “insatiable appetite” for spending, alongside soaring oil prices and a supply chain crisis, are threatening to cause hyperinflation, said Alex Kimani on OilPrice.com. Some analysts believe this hyperinflation could lead to a devaluation of the dollar and oil prices could exceed $180 by 2022.
John Kemp, a market analyst at Reuters, said further significant price rises may be needed to “compel consumers to reduce oil use and switch to cheaper alternatives and encourage producers to boost output”.