Oil could surge to $125-130/b on oil disruptions, analysts warn

Quantum Commodity Intelligence – Crude oil futures, already trading at eight-year highs, of around $103/b could rise by a further $22-27/b by the summer if supply from Russia is disrupted, banks and analyst firms said Thursday.

Uncertainty around potential sanctions could cause a potential supply shock, Goldman Sachs said, while analysts at Rystad warned that 1 million bpd of Russian crude through Ukraine and the Black Sea is already at risk.

"In our view, until the uncertainty around the rapidly escalating situation is resolved, commodity price risk remains skewed to the upside, with further escalation likely to send European natural gas, wheat, corn and oil prices higher from already-elevated levels," the US bank said in a report.

"Crucially, we see a clear risk of $125/b in crude should the global market need to balance by summer 2022," it said.

"The Brent benchmark smashed the $100/b mark this morning, and prices are only set to climb further on low storage inventories and export disruptions," analysts at Rystad said in their report.

"Prices could approach $130/b by June if the Ukrainian conflict disrupts Russian crude flows, but that estimate could soar higher if additional disruptions materialize," it added.

Rystad said that the price rise could be capped at $105/b, Thursday's high, should Russia swiftly achieve its military objectives and sanctions are limited.

The US and UK have not targeted energy supply through the initial round of sanctions, with export restrictions and sanctions on banks and individuals being the main thrust of Thursday's round of penalties.

Proposals to ban Russia from the Swift banking system – which would disrupt payments for commodities – was blocked by at least two members of the G7 in talks on Thursday.

Newswire reports suggested that Germany and Italy blocked the proposal.

Speaking in the UK House of Parliament on Thursday, UK Prime Minister Boris Johnson said: "On the issue of a potential ban from the Swift banking system, I can confirm that nothing is off the table.  But for all these measures to be successful it is vital that we have the unity of our partners in the G7 and other forums."

Elsewhere, several banks have refused to issue letters of credit to buyers of Russian crude, according to media reports, while insurance companies were said to be wary of dealing with commodities from Russia over fears of future sanctions.