American consumers may have gotten a bit of a break from sky-high gasoline prices over the past few months as the prices of oil and natural gas in the U.S. have eased off their peaks of earlier in the year.
But any U.S. consumers who think $5-a-gallon gasoline is a thing of the past might want to listen to what Helima Croft, head of global commodity strategy at RBC Capital Markets, has to say.
During the “$8 a Gallon Gas?” panel at MarketWatch’s Best New Ideas in Money Festival on Wednesday, Croft told MarketWatch’s editor in chief, Mark DeCambre, that she believes global oil and natural-gas prices could surge later this year as Russia escalates the conflict in Ukraine as Western sanctions against the Kremlin take full effect.
“‘Losing for Putin may not be an option.’”
— Helima Croft, RBC
“We should be bracing for an escalation,” Croft said in response to a question about Russian President Vladimir Putin’s announcement of a mobilization of reservists on Wednesday — the latest sign that Russia is escalating the conflict in Ukraine following its most recent military setbacks.
The escalation was accompanied by extraordinarily pointed nuclear saber-rattling.
See:Markets ignore Putin’s nuclear saber-rattling. Why that might change.
Also: Putin partial military call-up sparks protests across Russia
“We should be bracing for more disruption in the energy markets come December,” Croft said, highlighting Dec. 5 — the date when a sanctions waiver for energy-related payments made to Russia expires — as a potential inflection point.
Before that happens, American consumers and oil traders will need to grapple with another issue: the end of releases from the U.S. Strategic Petroleum Reserve. For the past few months, at President Joe Biden’s order, the U.S. has been supplementing the global energy market with 1 million barrels of oil a day.
“The question is, Will there be additional releases?” Croft said. “And when will we start buying back oil?”
Croft was joined on the MarketWatch panel by Alexandra Pruner, a senior adviser at Tudor, Pickering, Holt & Co., an investment bank focused on energy. As talk turned to the impact of the strong U.S. dollar on oil and gas prices, Pruner said that American energy companies have shown “profound capital discipline” when it comes to returning money to shareholders.
Recently, oil traders have made money by “fading” the bounce in crude-oil prices that followed Russia’s invasion of Ukraine. But Croft said investors may be underestimating the possibility that Putin could redouble efforts to starve Europe of crude oil and natural gas.
“Losing for Putin has not just professional consequences. It has potential personal and survival consequences as well,” Croft, a former intelligence analyst with the Central Intelligence Agency, said. “Losing for Putin may not be an option.”
So far, crude oil has taken the news of Russia’s latest escalation in stride. After rising earlier Wednesday in response to news of the Putin call-up of reservists, West Texas Intermediate crude futures
for November delivery ultimately settled at their lowest level in two weeks.
See: Oil prices fall on a third weekly rise in U.S. crude supplies, as Fed agrees to another rate hike
But an escalation by Russia isn’t the only factor that could send oil prices higher.
“Any indication that China is lifting those [pandemic-related] lockdown restrictions, and I would be a buyer of oil,” Croft said.
Get insights on investing and managing your finances. Speakers include investors Josh Brown and Vivek Ramaswamy; plus, topics such as ESG investing, EVs, space and fintech. The Best New Ideas in Money Festival continues Thursday. Register to attend in person or virtually.