Crude oil prices are heading towards US$150 per barrel this year, according to the chief executive of oil and commodities trading giant Trafigura.
Speaking at an FT conference, Jeremy Weir said if oil reached that level demand could slump and trigger a slowdown in global economic growth.
Very high energy prices for a period of time will lead to demand destruction, he said, adding that surging prices of key metals such as nickel and lithium were adding to the problem.
Energy markets were in a “critical” state, said Weir, with sanctions on Russia’s supplies adding to problems caused by years of under-investment.
“I really think we have a problem for the next six months,” he said, with a serious risk of a sharp spike in the crude price.
Brent crude currently is trading around US$119, having dropped back from US$140 when Russia invaded Ukraine.
However, analysts recently have been raising forecasts again as demand from China is expected to rebound strongly as it lifts Covid lockdown measures while Russian production drops.
Based on that, Goldman Sachs (NYSE:GS) recently suggested oil prices will average more than $140 a barrel in the third quarter of 2022, the peak of the US driving season.
Other brokers generally are not yet at the Goldman level. Barclays, for example, sees oil prices averaging US$111 this year, though this was US$11 per barrel more than its previous estimate.
Saudi Arabia also recently increased prices for customers in Asia underlining its confidence high prices are here to stay, said analysts.
Weir added that Trafigura had effectively shut its Russian business due to the Western sanctions.