How to keep oil prices from rising quickly to $150 a barrel after Russia’s war on Ukraine? One veteran trader suggested that the best hope is to stop spending amid a surge in prices.
Rebecca Babin, senior energy trader at CIBC Private Wealth US, said: “I think the only thing that will stop the rally right now is demand destruction. In the past everyone thought that would happen above $125, but I think it’s mostly just a concept. Sexual, theoretical point of view.”
It seems that this theoretical view is about to be put to the test.
U.S. oil prices hit their highest level since September 2008 on Thursday. Brent crude traded near $119 a barrel before falling back to $110 a barrel.
Oil prices have surged about 20% since Russia invaded Ukraine on fears of Russian production cuts.
Rising crude oil prices have begun to affect the price consumers pay for fuel at the gas station. The average U.S. gasoline price rose nearly 8 cents to $3.59 a gallon in the past week alone, according to the latest data from GasBuddy. Diesel prices rose about 6 cents over the past week.
Gasoline prices have risen more than 23 cents in the past month, up nearly 88 cents from a year ago, and have risen for nine straight weeks.
CIBC’s Babin sees the potential for oil to surge to around $150, even as the market worries about demand destruction.
“It’s hard to avoid that because crude oil production is not as good as it used to be,” she said. “There isn’t the same amount of inventory or spare capacity available. If geopolitical risks don’t bring oil back down in the short term, it will go all the way up,” she said. $120 and $150.”