Barclays Forecasts 50% Oil Price Rise Amid Supply Shortfall
Barclays predicts oil prices could surge 50% before supply and demand balance, citing ongoing Middle East disruptions and high price elasticity.
Key points
- Barclays predicts oil prices could rise 50% from current levels to balance supply and demand if the geopolitical situation persists.
- Global oil supply is currently down 4.7 million barrels per day, with significant demand declines in China and the OECD regions.
- Australian retail fuel prices are at multi-month highs, with diesel averaging $2.91 per litre and unleaded petrol at $2.40 per litre.
Barclays has warned that global oil prices may need to rise by another 50% from current levels to restore market balance if the ongoing geopolitical disruption persists. The bank’s commodities researcher, Amarpreet Singh, stated that the scale of the supply shock and the observed price elasticity of demand indicate that prices are far from converging with fundamental supply constraints.
This assessment comes as the Australian market opened higher, with the ASX 200 gaining 0.2% to 8,753 points, according to reporting from abc.net.au. The rally was driven by a strong performance in US technology stocks, which pushed the Nasdaq to a record high, while crude oil prices dipped to their lowest levels since early September on hopes for a diplomatic resolution to the US-Iran conflict.
Supply Shortfall Remains Persistent
Current data indicates a loss of 4.7 million barrels per day in oil supply, a significant reduction from the 12-13 million barrels per day lost at the start of the conflict. Singh noted that this persistent gap requires higher prices to incentivize production and reduce demand. The bank highlighted that the disruption to the East-West pipeline in Saudi Arabia remains a critical risk to the gradual recovery of regional oil flows.
Global Demand Shows Early Decline
Demand from the OECD, China, and India, which together account for roughly two-thirds of global oil consumption, has fallen by 1.3 million barrels per day year-on-year. This decline is attributed to the reversal of front-loading strategies and the direct impact of high wholesale prices, with diesel prices in the West rising 52% year-on-year.
Retail Prices Hit Multi-Month Highs
The pressure on wholesale costs is translating into higher retail prices in Australia. The average price for diesel has reached $2.91 per litre, marking a five-month high, while unleaded petrol averages $2.40 per litre, approaching a six-month peak. These figures reflect the immediate economic impact of the global supply constraints on local consumers.
