Oil prices hitting $120 barrel in 'realm of possibility': Analyst

Ines Ferré
·Senior Business Reporter
·2 min read
89

Hitting $120 per barrel of oil is “not at all out of the realm of possibility,” Pavel Molchanov, an analyst at Raymond James, told Yahoo Finance Live on Friday.

Escalating tensions between Russia and Ukraine sent U.S West Texas Intermediate (CL=F) and Brent (BZ=F) crude higher on Friday. WTI March futures settled at $93.10 per barrel.

Brent futures briefly touched $95 dollars a barrel during the trading session, their highest level since 2014. U.S National Security Adviser Jake Sullivan indicated Russia could invade Ukraine before the winter Olympics end on Feb. 20. The U.S and the U.K. urged their citizens to leave Ukraine while commercial flights are still available.

“Russia is one of three countries in the world — the [others are] Saudi and the U.S — that each provide 10% of the world's oil. Of the oil that Russia produces, about half goes into the European market via pipeline,” said Molchanov.

“By definition, those pipelines, in the event of direct war, would be at direct risk,” he said. “Those pipelines would be either shut down or in the worst-case scenario outright damaged in the event of an all-out military confrontation.”

The analyst said the impact of high oil prices would not be as severe in the U.S. as in those countries particularly dependent on imports.

“Think about India, Germany, France … their economies would be even more adversely affected by a spike in oil to $120,” said Molchanov.

He also noted, “If prices were to spike in the event of war into the triple digits, that would pressure demand.”

“The counter to that is supply would drop even more sharply. Prices would not stay in the triple digits forever, let's be clear, but in the run-up to a war, and certainly during a war, yes, I think $120/barrel is not at all out of the realm of possibility,” he added.

DTN ​​senior market analyst Troy Vincent, told Yahoo Finance recently that there's room for oil prices to go higher, especially amid rising tensions between Russia and Ukraine.

"You could see a 10%-15% run higher, if in fact, you did begin to see some type of hot war," he said.

Ines is a markets reporter covering stocks from the floor of the Nasdaq. Follow her on Twitter at @ines_ferre

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Instagram, YouTube, Facebook, Flipboard, and LinkedIn