Oil prices could double from current levels to $250 per barrel this year, according to energy industry experts, due to an ongoing international boycott of Russian energy supplies.
According to Pierre Andurand, who runs Andurand Capital Management and is known as one of the top hedge fund managers in the energy sector, there simply aren’t enough supply alternatives available outside of Russia.
“Wake up, wake up. “We are not returning to normal operations in a few months,” Andurand said on Wednesday at the FT’s Commodities Global Summit in Lausanne, Switzerland.
“I believe we are permanently losing Russian supply on the European side.”
After Russia’s invasion of Ukraine caused the sixth-largest disruption in oil supply since WWII, the price of Brent crude oil, the international benchmark, rose as high as $139 per barrel.
Despite a subsequent pullback, prices have started to rise again in the last week, rising nearly 20%. Brent crude was back near $120 a barrel on Thursday, as renewed fears of a disruption in Russian energy supplies shook the market.
Andurand isn’t the only top commodities expert who believes oil prices will reach new highs.
Doug King, the chairman of RCMA’s Merchant Commodity Fund, stated this week at the FT Commodities Global Summit that he believes oil prices could reach $250 per barrel this year. “This is not a passing fad. “There will be a crude supply shock,” he predicted.
Oil prices have been volatile since Russia invaded Ukraine, but things could get much worse if the EU follows the US in banning Russian oil imports. Russia supplies roughly a quarter of the EU’s oil and more than 40% of its natural gas.
“Uncertainties about Russian oil inject volatility into oil trading,” Ipek Ozkardeskaya, senior analyst at Swissquote, told Fortune in an email. “We’re seeing good positive and negative swings, but the bulls are winning.” If Europe decides to withdraw from Russian oil, oil prices will almost certainly rise again.”
Russian President Vladimir Putin’s decision to force “unfriendly” countries, including the United States, the European Union, the United Kingdom, and Japan, to settle energy transactions in rubles rather than dollars or euros has also raised concerns that Russia may be willing to retaliate for sanctions by limiting energy exports.
On Wednesday, Russian authorities shut down an oil pipeline that transports more than 1% of global oil demand, citing storm damage.
“If it’s a weather-related ‘accident,’ it’s certainly a convenient one from Moscow’s standpoint,” Bob McNally, CEO of Rapidan Energy Group, told the Financial Times on Wednesday.
Tensions in the global energy market are rising as US President Joe Biden prepares to meet with European leaders on Thursday.
“Investors anticipate additional sanctions against Russia, as well as a plan to reduce Europe’s reliance on Russian energy,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a client note on Monday.
According to Ben Luckock, co-head of oil trading at commodity trading firm Trafigura, disruptions in Russian energy exports due to additional sanctions will only lead to higher prices. This could have disastrous consequences for developing countries.
“While the United States, Western Europe, and the world’s wealthier countries will be able to afford some of these tax breaks, print some money… “Poverty-stricken countries will not have the same toolbox,” Luckock said at the summit. “These will be the first to suffer, and these are some of the unintended consequences of the policies that are likely to be implemented.”