US consumers may have gotten a break from skyrocketing gas prices in recent months as US oil and natural gas prices eased from their peaks from earlier this year.
But any US consumers who think $5 a gallon gasoline is a thing of the past may want to listen to what Helima Croft, head of global commodities strategy at RBC Capital Markets, has to say.
During a panel titled “$8 a Gallon Gas?”, Croft told MarketWatch editor-in-chief Mark DeCambre that she believes global oil and natural gas prices could soar later this year as Russia escalates the conflict in Ukraine as Western sanctions take full effect.
“We must brace ourselves for an escalation,” Croft said in response to a question about Russian President Vladimir Putin’s decision to announce a partial mobilization of reservists on Wednesday — the latest sign that Russia is escalating conflict in Ukraine after the war. most recent military setbacks.
The escalation was accompanied by another round of nuclear saber rattling.
To see: Markets ignore Putin’s nuclear saber chatter. Why that might change.
“We should brace ourselves for more disruption to energy markets in December,” Croft said, citing December 5 — the date when an exemption from sanctions for energy-related payments to Russia expires — as a potential inflection point.
But before that happens, US consumers and oil traders will also have to grapple with another problem: the end of emissions from the US Strategic Petroleum Reserve. For a few months now, the US has been supplying the global energy market with 1 million barrels of oil per day.
“The question is, are there any more releases to come?” said Croft. “And when are we going to buy back oil?”
Croft was joined on the panel by Alexandra Pruner, a senior advisor at Tudor, Pickering, Holt & Co, an energy investment bank. Speaking of the impact of the strong US dollar on oil and gas prices, Pruner said US energy companies have shown “deep capital discipline” when it comes to returning money to shareholders.
Recently, oil traders have made money by “weakening” the rebound in crude oil prices after the Russian invasion of Ukraine. But Croft said investors are underestimating the possibility that Putin could redouble his efforts to starve Europe of crude oil and natural gas.
“Losing to Putin doesn’t just have professional consequences. It also has potential personal and survival implications,” said Croft, a former intelligence analyst with the Central Intelligence Agency. “Losing to Putin may not be an option.”
So far, crude oil has followed the news of Russia’s latest escalation with momentum. After rising earlier in the day in response to news that Putin called out reservists, West Texas Intermediate crude futures CLX22,
for November, Wednesday delivery finally hit its lowest level in two weeks.
To see: Oil prices fall after a third weekly rise in US crude inventories as the Fed agrees to another rate hike
But an escalation by Russia is not the only factor that could push oil prices up.
“Any indication that China is lifting those lockdown restrictions and that I would be a buyer of oil,” Croft said.
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