JP Morgan revised its forecast for oil demand this year down by 1 million barrels daily, citing high oil prices.
Per a report by Reuters, the bank meanwhile left unchanged its price forecast for Brent crude at $114 per barrel during the current quarter, and $104 per barrel for the year.
However, if another million barrels daily disappear from global supply, the bank added, Brent crude could add another $18 to $35 per barrel above its price target.
BP’s CEO Bernard Looney said earlier this week Russia had already lost 1 million bpd in output and could lose another one this month.
"We now see total oil demand averaging 100 million bpd, 400,000 bpd below 2019 levels," the bank’s analysts also said.
Prices meanwhile surged to over $110 per barrel for Brent and $108 for West Texas Intermediate after the European Commission announced a proposal to impose a gradual oil embargo on Russia within the next six months for crude oil and until the end of the year for oil products.
Some EU members have expressed misgivings about the move because of their high dependence on Russian oil imports. Exemptions are on the table. There are other critics of this sort of embargo, too.
"In the short term it might leave Russian revenues high while implying negative consequences for the EU and the global economy in terms of higher prices - not to mention retaliation risks (by Russia) on natural gas supplies," Belgium-based think tank Bruegel said, following the EC’s announcement.
However the EU decides to proceed, sanctions would also include a ban on European companies providing shipping, insurance, brokerage and financing services to Russian oil producers, to take effect in a month. This would also have a negative impact on Russian oil shipments to Europe, such as sanctions on the country’s maritime industry had earlier this year.
By Irina Slav for Oilprice.com
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An EU ban on Russian oil supplies estimated at 4.2-5.6 million barrels a day (mbd) of crude and petroleum products could see Brent crude price jumping to $140-$150. That will be a catastrophe for the global economy particularly the United States and the EU whose economies will suffer most. On the other hand, Russia will be raking in cash as a result of steeply rising oil and gas prices.
Therefore, it is far cheaper for the EU to continue importing Russian crude at the current prices than to ban them and then tries to buy the same volumes at prices 27%-36% higher. And that depends on finding alternatives to Russian oil supplies. But there will be none.
Some EU members have expressed misgivings about the proposed ban. It only needs a veto from Slovakia or Hungary or Bulgaria to sink it.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London