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‘Economic destruction’ may lie ahead as oil prices surge: Analyst


Oil prices are spiraling higherAccording to an oil analyst, this may lead to supply issues and an economic downturn as the Russia/Ukraine crisis unfolds.

“I am concerned about the lack of oil in this area, so we should increase our production to $120-150.” [per barrel]Paul Sankey from Sankey Research said, “We get to economic destruction.”

According to research notes, the firm expects oil prices to trade between $100-150 per barrel and will continue trading until Ukraine’s situation is settled.

International benchmark Brent crude futures jumped 3.24% to $116.59 per barrel, after earlier crossing the $119 level. U.S. crude futures climbed 3.26% to $114.21 per barrel.

Sankey stated that oil cargoes coming from Russia are “simply not moving” after the news about sanctions and invasions, even though they were at lower prices. “Squawk Box Asia”On Thursday.

“There was an immediate and major outage, which caught a tight market already with low inventories.”

He said that everyone is concerned about the high prices, which will lead to severe recessions, and destroy oil demand, as well as slowing down many economies.

The role of OPEC

Sankey suggests that it was a good call despite extreme moves in oil prices. OPEC and its allies to stick to their small production increase in April as planned.

“The scale of the emergency here is so severe that you probably don’t want to be doing what the Western governments are doing, which is … releasing emergency stocks,You should not leave yourself with stocks that are even less,” he stated.

“By analogy, if Saudi Arabia or the UAE exhaust their spare capacities, well, then you don’t know the next thing,” he said.

Sankey pointed to Iraq and Libya as examples. He said that “any dangerous supply source could go missing” and that oil prices could soar to $200 per barrel.

He said that OPEC+ was “probably just sitting there, to see what this plays out.”

However, not everyone is on board.

David Goldwyn, President of Goldwyn Global Strategies (an international energy advisory firm), said, “I believe it’s a huge mistake.”

He singled out Saudi Arabia and the UAE, which have spare capacity to pump more oil, and said they are punishing their primary future market — Asia.

“They’re on the wrong side history. Making themselves an unreliable supplier, reminding the rest of the world why it was important to stop Middle East oil,” he stated.

— CNBC’s Sam Meredith contributed to this report.