Oil prices could soar to $150 in a fully reopened world: Jeffreys

Oil prices could move “significantly above” current levels due to the deep world’s dependence on fossil fuels and could reach $150, says Christopher Wood of Jefferies.

“In a world that’s really reopened — which is a big thing — the price of oil could go up exponentially,” Wood, the investment bank’s global head of equity strategy, told CNBC’s Street Sings Asia on Wednesday.

“Oil is over $80 with a lot of Asia closed,” he said, and China’s borders are still virtually closed, referring to the Beijing’s Strict No-Covid Approach. “In a world that has already completely reopened, the price of oil could go up to $150 because supply constraints are significant.”

The strategist said that the “political attack” on fossil fuels in recent years has removed the incentive to invest in the sector despite its continuing importance, noting that 84% of global energy demand last year was met by fossil fuels.

“The issue for me is not the price of oil, the issue is the pandemic. The price of oil is going to rise in a world that has completely reopened because nobody is investing in oil but the world is still consuming fossil fuels,” he said.

“So the price of oil could go up a lot and that could certainly escalate inflation fears,” Wood said.

Nobody is investing in oil but the world is still consuming fossil fuels.

Christopher Wood

Global Head of Equity Strategy, Jefferies

Noon Wednesday during Asian trading hours, the international benchmark Brent crude futures contracts It was around $71.90 a barrel at the time US crude futures contracts It was around $68.50 a barrel.

Oil had its worst day of 2021 on Friday Amid the global market defeat, raised by WHO warning on Thursday About alternative omicron covid. Oil prices have fluctuated sharply between positive and negative territory since then, as investors seek to explain the economic impact of the newly identified variant that contains far more booms than previous dynasties.

“For me, the only thing that will really lower the price of oil is the new shutdowns in the western world, which is why oil was corrected when we saw the news about the new alternative,” Wood said.

Global investor sentiment remains fragile since the identification of the new Covid variable.

Inflation forecasts and the Federal Reserve

Looking ahead, Wood predicted that inflation will likely end up structurally higher than it was before the pandemic.

He said there could be more volatility in the future except for any “really negative results” on Covid, even as vaccination efforts intensify.

Wood explained that the expectation of higher structural inflation in the future means that markets will be at the mercy of tightening and tapering fears: “It really comes down to how tight the Fed really is.”

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US Federal Reserve Chairman Jerome Powell said, Tuesday, the central bank may end its bond-buying program earlier than initially planned as the country battles mounting inflationary pressures. That could open the door for the Fed to raise interest rates early, though Powell stressed that tapering should not be seen as an indication of a looming rate hike.

“Personally, I think … the Fed is going to be talking about a tougher game than it is acting,” Wood said. “In my opinion, they will remain basically pessimistic.”

“If they suddenly decide to start tightening in a meaningful way, that’s a big deal. But if they did, I think the markets would drop sharply,” said Jefferies’ strategist.

“I continue to believe that any kind of risk-off move, the Fed will pull back from its tightening very quickly and move more in the direction of financial repression — by which I mean more of a severing of the links between inflation and interest rates,” Wood said.

– CNBC’s Elliot Smith and Jeff Cox contributed to this report.

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