Oil prices could soar even further as OPEC hits limits on its capacity while China’s economic reopening lifts demand, according to Helima Croft, RBC’s top commodities strategist.
Saudi Arabia could add 1 million barrels per day to global markets, but other OPEC members like Libya are having production problems while OPEC partner Russia is facing European Union sanctions that will lower output.
“We do not have a lot of additional OPEC oil out there,” Croft said in an interview on CNBC, even as President Biden heads to Saudi Arabia next month to seek more production.
The partial oil embargo on Russia that the EU is phasing in a key risk too, she added. The new sanctions and the so-called self-sanctioning that has already taken place could mean 2.2 million barrels of Russian oil will have nowhere to go, Croft estimated.
A proposed price cap on Russian oil could allow it to flow to eager buyers like India without disrupting global markets further and pushing prices higher. But that runs the risk of Russia retaliating by cutting off oil supplies now to drive up prices, she warned.
The tight oil market has also been exacerbated by the reopening of China’s economy from strict COVID lockdowns, boosting demand for crude.
“If China comes back as a significant buyer, that’s only going to push prices higher,” Croft said.
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