Stock Groups

Oil price spike could prompt demand slump, MUFG analysis suggests -Breaking


© Reuters. FILE PHOTO : Pump Jacks can be seen in the morning near Bakersfield (California), October 14, 2014. REUTERS/Lucy Nicholson

LONDON, (Reuters) – Soaring prices continue to follow the same trajectory as 2007-08 when prices reached a record high of $150 per barrel. Demand destruction kicked in, and prices plummeted in a global recession. Analysis by Mitsubishi UFJ Financial Group, (NYSE:) shows.

Brent crude oil reached $113.02 Wednesday as supply disruption worries mounted following the hefty sanctions imposed on Russian banks by the United States in response to Ukraine’s intensifying conflict. [O/R]

Ehsan Khaman, head of emerging market research at MUFG said that oil prices are so far removed from marginal costs of supply owing to extreme lack of oil. ”

“Supply shortage is playing out today in oil markets, which critically predates geopolitics today – today’s Russia-Ukraine crisis merely turbocharges today’s extreme supply shortfalls.”

The International Energy Agency, (IEA) members agreed to release 60 million barrels from their strategic reserves on Tuesday. However, it did not calm spiking oil prices.

In the wake of a strong recovery in post-pandemic demand, oil inventories have fallen steadily in developed countries.

In parallel, the world’s spare capacity to produce oil at any time has decreased as Russia and the Organization of the Petroleum Exporting Countries increase their output targets.

Disclaimer: Fusion MediaThis website does not provide accurate and current data. CFDs include stocks, indexes and futures. Prices are provided not by the exchanges. Market makers provide them. Therefore, prices can be inaccurate and differ from actual market prices. These prices should not be used for trading. Fusion Media is not responsible for trading losses that may be incurred as a consequence of the use of this data.

Fusion MediaFusion Media or any other person involved in the website will not be held responsible for any loss or damage resulting from reliance on this information, including charts, buy/sell signals, and data. Trading the financial markets is one of most risky investment options. Please make sure you are fully aware about the costs and risks involved.