Brent Crude Oil Could Reach $150 per Barrel If Russian Exports Are Sanctioned: Bank of America

A driver unloads raw crude oil from his tanker to process into gas at Marathon Refinery in Salt Lake City, Utah, on May 24, 2022. George Frey/Getty Images

There are major concerns over the tightening supply situation in the global crude oil market, as the global oil benchmark Brent crude nears a two-month high.

Brent crude could rise past $150 a barrel if there is a sharp cut in Russian oil exports, according to Bank of America’s (BOA) Global Research report on May 27.

Prices of both commodities increased more than 3 percent after trading on May 26, on top of their already elevated prices.

The high prices are being driven by stronger demand for fuel as the pandemic winds down, while tight supplies and oil sanctions on Moscow are not easing the situation.

West Texas Intermediate futures were trading at $114 per barrel, while Brent crude futures were trading at $117 per barrel at the time of writing.

Oil prices have surged and inventories in the United States and Europe have plummeted since Western nations imposed sanctions on Russia over its invasion of Ukraine.

“With our $120/bbl Brent target now in sight, we believe that a sharp contraction in Russian oil exports could ... push Brent well past $150/bbl,” noted BOA analysts.

The report admitted that its earlier prediction that Brent oil would be priced on average at $102 per barrel over 2022 and 2023 no longer rings true. The moving averages for 20, 50, and 200 days were at $110, $108, and $90 per barrel, respectively.

Analysts are not expecting oil demand to return to pre-pandemic levels anytime this year.

For now, the bank is forecasting Brent prices at averaging at $104.48/bbl in 2022 and $100/bbl in 2023.

“A supply-led $30/bbl increase in oil prices this year shaved 1.5mn b/d off demand, preventing a recovery to pre-COVID levels,” bank analysts said.

The report said that the only way oil demand could approach 2020 levels in 2023 would be if Russian energy production were to hold near 10 million barrels per day, and if OPEC+ were to increase production.

An increase in U.S. domestic energy production is another factor, but is not expected to improve under the Biden administration.

The European Commission is attempting to press forward with its proposed oil embargo on Russia, but Hungary, which is dependent on oil and gas imports from Moscow, has so far vetoed the measure.

Hungary has requested almost a billion dollars to upgrade its oil refineries before even agreeing with its fellow EU members to restrict Russian oil imports into Europe.

EU negotiators are trying to strike a deal with Hungary on the Russian oil sanctions by offering concessions that would exempt oil delivered by pipeline to Hungary, in order to pass the agreement.

If Hungary accepts the proposal, an agreement could be reached by the ambassadors of EU member states in Brussels on May 29, in time for the May 30–31 leadership summit.

Meanwhile, the reduction of Russia energy imports into the EU and the United Kingdom sparked an economic downturn in areas already struggling to recover from pandemic lockdowns.

Oil prices were still on track for weekly gains as of May 27 due to rising gas consumption in the United States amid the start of the summer driving season and the pending EU ban on Russian oil.

Reuters contributed to this report.