Oil prices could slump to $75 a barrel in a recession — or jump to $150 if European sanctions slam Russian supplies, BofA says

According to Bank of America, oil prices could go either way.

Concerns of a recession have sent crude prices to their second consecutive weekly decline, but they remain above $100 per barrel, despite high demand and constrained supply.

Oil demand will struggle to recover to pre-pandemic levels until next year as a result of inflation and interest rate hikes.

BofA had a wide range of possibilities due to the crosscurrents and risks. Analysts don't think there will be a recession and expect the price of crude to average $102 per barrel in the next two years.

On Friday, the price of oil was $113 per barrel, but is down from a high of $133 in March.

According to BofA's estimates, a recession would cause a decline in fuel consumption and cause oil prices to plummet.

Any easing of monetary policy from the central banks would support oil prices. BofA expects crude to average more than $75 a barrel during a recession.

Western governments have imposed sanctions on Moscow in order to punish it for its actions.

As the EU's Russian oil embargo phases in over the rest of the year, more and more barrels could disappear from global markets, hitting Russia's output and sending prices soaring.

BofA said that if European sanctions push Russian oil production below 9 million barrels per day, oil prices could spike to $150. The long-term effects of supply disruptions have not been appreciated.

Analysts said that the market does not seem to be pricing in a decade-long Russian supply crisis, as long dated oil prices have stayed firmly anchored in our long term oil price band of $60 to $80/ bbl. Extending sanctions on Russian energy could act as a price floor.