If the Russia-Ukraine crisis worsens, JPMorgan (JPM) projects oil prices could surge to record levels…
In a report, the investment bank warned that a possible invasion by Russia in Ukraine could send oil prices drastically higher.
In fact, if the situation escalates, JPMorgan said crude could rise to as much as $150 per barrel in the coming weeks.
In turn, it may put a major dent in global economic growth. Current forecasts suggest the global economy could grow by 4.1% in the first half of the year.
However, if Russia’s troops march toward Kiev, that growth could tumble to around 0.9%, further exacerbating broader woes related to inflation.
That’s because members of the United Nations said they would impose major economic sanctions on Russia – a major oil producer – if it moved forward with its plans. In response, Russia could then halt its oil from entering opposing countries.
This would send worldwide inflation up by more than double from the projected 3% to 7.2% – as shocks in the oil market have historically resulted in cyclical downturns.
In this situation, it could force global central banks to tighten monetary policy more rapidly than they initially intended as well…
And these factors could ultimately drive investors further away from growth stocks, technology, and riskier investments in favor of value plays, commodities, and cyclicals – potentially benefiting companies such as Enterprise Products Partners (“EPD”)…
EPD offers midstream energy services to oil, natural gas, natural gas liquids, and petrochemical producers. These services include gathering, storing, processing, and transporting a variety of fossil fuels.
This means it has exposure to the oil market without having to invest in oil-drilling projects and other expensive ventures.
And given the fact that it largely stores and transports fossil fuels, it could benefit from higher prices per barrel – as consumers may look to further reduce their energy consumption in whatever ways they can.
In turn, this may force producers to have a greater reliance on its services while paying higher fees in the process. And if the situation plays out the way JPMorgan expects, its 7.8% dividend yield would help to reward its limited partners with greater passive income.
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