Will The Brewing Energy Crisis Send Oil Prices Skyrocketing To $175 A Barrel?

Commodity Markets Fundamental Analysis

Earlier this week, EU leaders announced an agreement to ban 90% of Russian Crude imports by the end of the year. News of the ban immediately sent Oil prices rallying back $120 a barrel, the highest level since March. While the move has been welcomed by many foreign policy leaders, it obviously doesn’t come without consequences.

Economists have warned that rising energy prices will continue push inflation pressures to unprecedented levels, raising the threat of a recession.

That view has also be echoed by The International Energy Agency, stating that falling global Oil supplies signal the repeat of a 1970s style inflation-induced recession as prices continue to remain elevate close to historical highs.

In comparison, there’s no denying that the current Energy Crisis is ‘much bigger’ than what was seen during the Oil shocks of the 1970s. Back then it was just about Oil. Now we have an Oil Crisis, a Gas Crisis, and an Electricity Crisis simultaneously.

And let’s not forget about China.

China’s move to end its strict lockdown policy in Shanghai and Beijing is also adding to global demand for Oil.

Expectations are running high, that the Oil market may see an identical V-shape recovery in demand as seen in 2020 when China ended lockdown. That event triggered an historic bull run taking Oil prices from sub $40 a barrel in April 2020 to a decade high of almost $140 a barrel in April 2022. That’s a record-breaking gain of more than 450%, in the last two years.

Against the current macro backdrop of tightening supplies, the largest war on European soil in almost 80-years, bans on Russian Crude imports and rapidly surging demand – evidence is mounting that the Oil market is only just at the beginning of a multi-year – if not decade-long Commodities Supercycle, bigger than anything ever seen before!

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