“I think a lot of this, especially for oil, is going to go back to Russia. And I think you are going to see supply upended, if not at the end of the year, if not before. I think that has the potential to cause oil prices to even spike higher than what we just saw a couple months ago,” Neal Dingmann, Truist’s managing director of energy research, told Yahoo Finance Live (video above).
50% price hike
Dingmann predicted gas prices could rise “potentially 50%” if the U.S. doesn’t have an alternate source for Russian oil. In 2021, Russia and Saudi Arabia were the top petroleum importers for the U.S. The nations supplied 8% and 5% of the total market’s natural gas across the 50 states.
Dingmann explained that the OPEC nations don’t have the spare production capacity to fulfill the supply deficit in the U.S. market at this point.
“Nearly all the OPEC+ members would be already producing more right now if they could. So, again, to me the only real true capacity, unfortunately out there, prior to all the issues, was in Russia.”
Dingmann pointed out that America “certainly” does not have the ability to expand domestic oil production. The supply shortfall resulted from the ban on Kremlin’s natural gas could bump crude prices “well over $150” per barrel, he added. (Currently, Brent is trading at around $100 per barrel (BZ=F) and the U.S. crude future (CL=F) is hovering about $97.)
U.S. Petroleum Import, 1960 – 2021
Biden visits Middle East
President Joe Biden is expected to negotiate his administration’s oil production agendas with Saudi Arabia on his trip to the Middle East this week. in an op-ed published this past Saturday in the Washington Post, Biden wrote that the oil exporter is “working with my experts to help stabilize oil markets with other OPEC producers.”
Biden’s tactic might turn out to be frivolous, said Dingmann. “Between the likes of Saudi, UAE, you name it, within OPEC+, they’ve all had the allowances to produce more and they basically say we’re going to stay constrained for various reasons,” because he believed, “they don’t have the capacity.”
Consumer’s demand for gas
On the flip side of the supply-shortage equation is America’s demand for gas. Essentially, the depth of consumers’ appetite will determine the height of the gas prices.
“I think in today’s environment I certainly think we could get close to $115 before you see any demand disruption,” Dingmann said.
Rebecca Chen is a writer and reporter at Yahoo Finance. Follow her on Twitter @RebeccaChenP