Brent crude prices could climb as high as $120 per barrel if geopolitical tensions remain unresolved, according to Jonathan Barratt, Chief Investment Officer at ETO Markets, who warned that persistent energy inflation could keep central banks on the path of tighter monetary policy.
Barratt said oil markets continue to face supply risks, with developments involving the Houthi rebels and Saudi Arabia adding to uncertainty. He expects crude prices to remain elevated through the current quarter unless there is a clear improvement in the geopolitical situation. He also believes higher energy costs could prolong inflation and increase the likelihood of additional interest rate hikes.
“I think without a resolution, she’ll continue to trade higher,” Barratt said. “There is that potential for it to push back up to $120 per barrel if we don’t see the resolution coming.”
Barratt said Brent crude is approaching a key technical level, with a break above $111.50 per barrel likely to trigger another leg higher. He said the market is increasingly focused on refining margins, particularly diesel supplies, which could drive the next wave of energy inflation.
“One of the biggest issues that I do have is just continually watching where that crack spread is actually going because that’s where we’re going to get that inflationary push,” he said.
He added that although diesel crack spreads have eased from recent highs, they remain above historical averages heading into the Northern Hemisphere winter, suggesting fuel markets could remain tight.
“We’re not getting the product that we need to the market,” Barratt said, adding that stronger heating oil demand during winter could keep refining margins elevated.
Barratt said central banks are likely to continue prioritising inflation control even if higher borrowing costs weigh on economic growth. While bond yields have eased from recent highs, he believes policymakers remain prepared to tighten further if inflation persists.
“The prospects for another one after this month still remain quite real,” he said, referring to the possibility of additional interest rate increases.
Barratt also noted that central banks could reverse course if higher interest rates begin to significantly hurt economic activity, but for now, inflation remains the key concern.
For the full interview, watch the accompanying video
Oil at risk of hitting $120/bbl as supply concerns persist, says Jonathan Barratt
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