The fact the West has refrained from curtailing Russia’s ability to market energy after its invasion of Ukraine highlights elevated concern about a sustained price shock, an Barclays analyst wrote in a note.
Noting the market also faces an extremely tight inventory situation and limited spare capacity, it said Barclays was keeping its $92 per barrel Brent price forecast for 2022, but saw risks to the upside if Russian energy supplies are disrupted.
Oil prices soared after Russia’s attack on Ukraine, sending Brent prices above $105 a barrel for the first time since 2014 before easing.
Global benchmark Brent crude climbed to as high as $101.99 per barrel on Friday.
Despite Washington announcing efforts to coordinate a global strategic petroleum reserve release efforts, U.S. retail gas prices are trending 4-5% above when that move was announced, said the Barclays note, which was published on Thursday.
“This means price would be the only viable mechanism to balance the abrupt shortfall in supplies, and that would come with an economic cost,” it said.
European gas prices are even more sensitive because of relatively sticky reliance on Russian supply, it said.
Russia is the world’s second-largest oil producer, which mainly sells crude to European refineries, and is the largest supplier of natural gas to Europe, providing about 35% of its supply.
Escalating tensions with Russia also increase the urgency for the United States to reach a deal with Iran to revive the Joint Comprehensive Plan of Action (JCPOA) and ease price pressures, Barclays said.
“Yet we remain skeptical, as such an agreement would still not be enough of a face-saving measure for the Iranian leadership, in our view, given its rhetoric on not trusting the West and the U.S.”