Only demand destruction could stop oil from rising to $115 over the next month due to the difficulties Russia will have in payments for its energy exports after the West removed some Russian banks from SWIFT after Putin invaded Ukraine, Goldman Sachs says.
The removal of selected Russian banks from the SWIFT international payment system and the goal to limit the international operations of Russia’s central bank would affect Russian seaborne oil exports in the near term, Goldman said in a note to clients on Sunday.
“Commodity markets need to reflect not only these difficulties in paying for Russia’s exports but, with little left to sanction, the risk that Russian commodities eventually fall under Western restrictions,” Goldman’s strategists wrote in the note.
The investment bank raised its one-month forecast for Brent Crude to $115 per barrel, up from a previous projection of $95. And according to Goldman Sachs, the upside risk is significant due to potential further escalation of the war, sanctions, or longer disruption to Russian oil exports.
After a drop on Friday, oil prices shot up again on Monday to above $100 per barrel following this weekend’s further tightening of the sanctions against Russia over Putin’s war in Ukraine. On Monday, the Russian ruble crumbled to an all-time low against the U.S. dollar, the Moscow stock exchange did not open, the Russian central bank doubled the interest rate to 20 percent, and people in Russia queued at ATMs and banks to withdraw cash.
The sanctions effect on the Russian oil trade has started to show. Reports started to emerge that some Chinese banks have reportedly stopped financing deals involving Russian oil and companies.
Commenting on Goldman’s oil price view, Goldman Sachs Head of Commodities Research Jeff Currie told Bloomberg on Monday:
“I just want to emphasize that at this point right now: unattended consequent risk -- meaning a pipeline outage or something like that -- is extraordinarily high.”
By Tsvetana Paraskova for Oilprice.com
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