“In a world that really reopens – which is a big ‘if’ – the oil price can go significantly higher,” Christopher Wood, global head of equity strategy at Jefferies, told CNBC.
“Oil got to over $80 with a lot of Asia closed,” while China’s borders are also virtually shut down; he stated, explaining that “in a really fully reopened world; the oil price could go to $150 because the supply constraints are dramatic.”
Wood noted that even the spread of the new Covid-19 variant will not be able to stop the growth of oil prices for a long time; they will inevitably rise to multi-year highs after restrictions are lifted and demand is back in full.
“The issue for me is not the oil price, the issue is the pandemic. The oil price is gonna go higher in a fully reopened world because nobody’s investing in oil but the world still consumes fossil fuels,” he said, adding that this will in turn “escalate an inflation scare.”
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Wood stated that the “political attack” on fossil fuels, with the growing number of countries aiming to go green, has slashed motivation for investment in the sector; despite the fact that 84% of the world’s energy demand last year was met by fossil fuels.
“The only thing that’s really gonna knock the oil price down is new lockdowns in the Western world; which is why oil corrected when we saw the news about the new variant,” he said.
On Friday, November 26, oil prices showed the largest decline this year amid a global market crash triggered by the warning from the World Health Organization about the danger of a new strain of Covid-19, Omicron.
As a result, the price of global benchmark Brent plunged by 11.6% – to $72.7 per barrel.
Since then, the market has seen sharp fluctuations as investors try to predict the impact of Omicron on the economy.
On Thursday, Brent futures rose roughly 2% to around $70 a barrel after Wednesday’s drop; while US benchmark West Texas Intermediate gained 1.8%, trading at over $66 per barrel at around 07:30 GMT.
Jefferies is not the first bank to predict a dramatic rise in oil prices.
JPMorgan Chase Bank and Bank of America analysts also recently warned of a surge in crude prices next year; up to $125 and $120 a barrel, respectively.