An oil price spike is starting to look increasingly possible, with a rerun of 2008 not entirely out of the question, according to a new report. Oil prices have hit a four-year high of over $81 (£62) a barrel after Saudi Arabia and Russia rejected calls by Donald Trump to increase production. Saudi energy minister Khalid al-Falih said at a press conference in Algiers that he did not “influence prices”. In a tweet last week, US president Donald Trump said that Opec “must get prices down now!” by raising global output.
“We protect the countries of the Middle East,” added Mr Trump. “They would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember.”
Last year, Opec and other oil-producing nations including Russia said they would extend a deal, first agreed in 2016, to cut production to help support oil prices after they fell below $50 a barrel. This deal was upheld at Sunday’s meeting.
The outages from Iran are worse than most analysts expected as buyers remain wary of penalties from sanctions due to take effect from November. Those fears have sent crude oil prices higher, with commodity traders Trafigura and Mercuria predicting prices could rise to more than $100 a barrel by early next year.
To top it off, new regulations from the International Maritime Organization set to take effect in 2020 could significantly tighten supplies.
Put it all together, and “the likelihood of an oil spike and crash scenario akin to the one observed in 2008 has increased,” Bank of America Merrill Lynch wrote in a note. BofAML has a price target for Brent at $95 per barrel by the end of the second quarter 2019. In 2008, Brent spiked to nearly $150 per barrel.
The supply picture is looking increasingly worrying, with Venezuela and Iran the two principal factors driving up oil prices in the fourth quarter. Notably, the bank increased its estimate of supply losses from Iran 1 million barrels per day (mb/d), up from 500,000 bpd previously.
