(MENAFN- Khaleej Times) Russian President Putin has necessary bandwidth to retaliate if G-7 implements price cap File photo by A Staff Reporter
Published: Sat 2 Jul 2022, 11:47 PM
Global oil prices could reach a“stratospheric” $380 a barrel if US and European penalties prompt Russia to inflict retaliatory crude-output cuts, says Bloomberg quoting JPMorgan Chase & Co. analysts.
The Group of Seven nations are hammering out a complicated mechanism to cap the price fetched by Russian oil in a bid to tighten the screws on Vladimir Putin's war machine in Ukraine. But given Moscow's robust fiscal position, the nation can afford to slash daily crude production by 5 million barrels without excessively damaging the economy, JPMorgan analysts including Natasha Kaneva wrote in a note to clients.
For much of the rest of the world, however, the results could be disastrous. A 3 million-barrel cut to daily supplies would push benchmark London crude prices to $190, while the worst-case scenario of 5 million could mean“stratospheric” $380 crude, the analysts reportedly wrote, according to Bloomberg.
“The most obvious and likely risk with a price cap is that Russia might choose not to participate and instead retaliate by reducing exports,” the analysts wrote.“It is likely that the government could retaliate by cutting output as a way to inflict pain on the West. The tightness of the global oil market is on Russia's side.”
The Organisation of the Petroleum Exporting Countries (Opec) in June did not deliver on an oil output increase pledged under a deal with allies, a Reuters survey showed, as involuntary declines in Libya and Nigeria offset supply increases by Saudi Arabia and other large producers.
Opec pumped 28.52 million barrels per day (bpd) in June, the survey found, down 100,000 bpd from May's revised total. Opec had planned to boost June output by about 275,000 bpd.
Opec plus Russia and other allies, known as Opec+, are unwinding 2020 output cuts made due to the pandemic, although many are struggling to do so. Opec+ at a meeting on Thursday stuck to its planned output hike for August.
Legal Disclaimer: MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.