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Oil prices could jump by up to another $20 per barrel if the Russia-Ukraine crisis escalates further, according to Bank of America (BofA) Global Research.
The latest escalation of the Russia-Ukraine standoff sent oil prices surging close to $100 a barrel early on Tuesday. Brent Crude prices hit a new seven-year high of $99.50 before easing to $97 per barrel. Late on Monday, Russian President Vladimir Putin recognized two separatist regions in eastern Ukraine and ordered the deployment of troops there in the most serious escalation of the crisis yet.
The market fears that the crisis could take additional turns for the worse and disrupt Russian energy exports, either with Western sanctions against Russian oil and gas supply, or with Moscow weaponizing its oil and gas exports. Russia’s oil and gas supply to the global market cannot be replaced quickly, analysts and industry officials say.
If, however, the situation in Ukraine de-escalates, oil prices could drop by between $2 and $4 per barrel, BofA said in a note on Tuesday carried by Reuters.
Brent Crude prices could hit as much as $120 per barrel by the middle of this year, the investment bank said. Fundamentals justify a near-term jump in prices with global demand set to continue to rebound and exceed pre-pandemic levels, BofA added.
“A weaker dollar trend and a pro-growth macro backdrop, if it indeed occurs, could support crude near triple digits in the second half of the year,” the bank’s analysts wrote.
Surging oil prices could find relief if an Iranian nuclear deal is reached, BofA noted.
Reports have it that the indirect talks between the United States and Iran about returning to the 2015 deal are in their final stage and are said to be “about to cross the finish line,” according to a tweet from Russia’s envoy Mikhail Ulyanov on Tuesday.
By Michael Kern for Oilprice.com
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Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com,