Russia’s invasion of Ukraine risks sending oil prices far higher than current levels, warned top commodities strategist Jeffrey Currie at Goldman Sachs on Friday.
“In our view, until the uncertainty around the rapidly escalating situation is resolved, commodity price risk remains skewed to the upside, with further escalation likely to send European natural gas, wheat, corn and oil prices higher from already-elevated levels. Crucially, we see a clear risk of $125/bbl in crude should the global market need to balance by summer 2022, as opposed to our current summer 2023 base case, in the face of these supply concerns, as we believe oil demand destruction would be required around the world to drive the faster rebalancing in global oil markets,” Currie said in a new research note.
Currie told Yahoo Finance Live earlier in the week a “super spike” in commodities prices must not be ruled out amid the geopolitical chaos. He recommends investors have exposure to oil, copper and aluminum.
To be sure, that is what they have done this week as the situation between Russia and Ukraine has escalated.
Brent crude oil prices popped to $105 a barrel on Thursday as Russia invaded Ukraine, sparking concern production from Russia would stop as the West ramps up sanctions. Russia is the world’s third-largest producer of oil.
Natural gas prices surged by double-digit percentages in Europe Thursday.
Prices for Brent crude fell back to $98 a barrel Friday morning as risk sentiment in global markets stabilized.
Meanwhile, price rallies have persisted in areas such as gold, wheat, and corn, ratcheting up recession risk around the world.
Adds Currie on oil, “While the range of near-term price outcomes is wide, our longer-term, bullish underinvestment thesis is very much intact and reinforced by these events.”
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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