Oil at $150 a barrel is not “outside the realm” of possibilities, says one energy trader.
“It’s hard to take anything off the table right now. Russia is starting to retaliate with its own response to U.S. sanctions, whether that’s demanding payments in rubles or potentially not allowing crude to flow through a very prominent pipeline through Kazakhstan,” Rebecca Babin, senior equity trader for CIBC Private Wealth, told Yahoo Finance Live.
“As we’ve seen this escalate in ways that were very low probabilities when we started, and having these tangential impacts across markets, I think $150 isn’t outside the realm of possibility. I think $200 is a massive overreaction because at $150 you start to see demand destruction.”
On Wednesday West Texas Intermediate (BZ=F) and Brent International (CL=F) crude futures jumped more than 4% amid Russia’s continued invasion of Ukraine. Russian President Vladimir Putin is now demanding ruble payments for natural gas purchases from European nations.
Oil prices have shot up since the start of the Ukraine-Russia war as much of the market created a ‘de facto ban’ on Russian oil while the U.S and UK have banned its’ import.
Babin says the war is going to “drastically change the energy complex across the globe.”
“Russia is not going to remain as big of a player as it has been as a result of this conflict,” she said.
“I think it very much benefits any energy producer that’s local in Europe, in the U.S., and other exporters into Europe.”
Babin highlights Saudi Arabia is increasing its CAPEX budget until 2027 to grow its output in crude oil.
“They’re making their long term decisions based on what’s happening right now,” she added.
