Oil prices will rise if the Russia-Ukraine crisis escalates

According to a report from JPMorgan, oil prices could rise to $120 a barrel if the crisis in Ukraine escalates. In a research note on Monday, the bank said that the current situation was the most severe crisis in the oil market. Moreover, it added that if Russia were to invade Ukraine, it could send higher oil prices.

The bank said it thought that a full-scale war with Ukraine would lead to a draw of 500,000 barrels a day from Russia, with supply from other countries seeing only a modest impact. In fact, the bank said that the current situation is already the most severe crisis.

The forecast highlights how a potential invasion of Ukraine would cause wide-ranging effects.

JPMorgan’s head of global commodities strategy, Natasha Kaneva, wrote in the report published late Tuesday. She said that any troubles to oil streams from Russia in other regions could easily send oil prices to $120. So, a rise from about $91 today would increase prices, hitting a fresh seven-year high on Wednesday.

Oil supplies and threatening forecasts

Russia-Ukraine tensions supported inflate oil prices in recent weeks. On Monday, Brent crude hit a high of $94 a barrel.

Russia is the world’s second-largest producer of oil and natural gas. According to the U.S. Energy Information Administration, it exports more than a quarter of the oil it produces. It is nearly a third of the natural gas it exports.

The country is also the world’s largest producer of uranium, electricity, and heat production. It has considerable coal, hydroelectric, and wind power resources. Some of Russia’s energy production capabilities are in areas of the country that are difficult to access.

Russia plays a key role at OPEC+ and has the highest production capacity of any OPEC member. It considerably influences the group’s key decision-making bodies. At OPEC+, Russia used that power to its advantage, pushing for production cuts to support oil prices and limit other nations’ production growth.