The head of Trafigura has warned that the oil market could reach a “parabolic state” later this year with prices surging to record highs and triggering a slowdown in economic growth.
Jeremy Weir, chief executive of the commodity trader, said that energy markets were in a “critical” state as sanctions on Russia’s oil exports following its invasion of Ukraine had exacerbated already tight supplies created by years of under-investment.
“We have got a critical situation,” Weir told the Global Boardroom conference on Tuesday. “I really think we have a problem for the next 6 months . . . once it gets to these parabolic states markets can move and they can spike quite a lot.”
A parabolic move in markets is generally defined as when a price that has been rising suddenly surges to hitherto unseen levels, mimicking the right side of a parabolic curve.
Weir added it was highly probable that oil prices could rise to $150 a barrel or higher in the coming months, with supply chains strained as Russia tries to redirect its oil exports away from Europe.
Brent crude, the international oil benchmark, which is trading near $120 a barrel, hit an all-time peak of $147 a barrel on the eve of the financial crisis in 2008.
The Trafigura executive is the latest to warn that the economy has not yet seen the worst of the energy crisis, with little way of lowering prices as global supplies are already tight and likely to get scarcer if Russian production falls further.
Jamie Dimon, JPMorgan chief executive, warned last week that prices could reach $150 or $175 a barrel later this year. Analysts at Goldman Sachs are forecasting oil could average more than $140 a barrel in the third quarter, when the US summer driving season is at its peak.
Weir said the rising price of other commodities, including metals such as copper and lithium, were also likely to weigh on global economic growth and could ultimately trigger a slowdown to curb demand.
“If we see very high energy prices for a period of time we will eventually see demand destruction,” he said. “It will be problematic to sustain these levels and continue global growth. ”