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

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© 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.

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