Winter oil price strategist, energy crisis in China and Europe

Oil prices could experience an “outsized spike” as winter approaches and OPEC and its allies are sticking to their earlier pact on oil production, a strategist told CNBC.

OPEC + – the Organization of the Petroleum Exporting Countries, along with its allies including Russia – has come under pressure from major consumers, such as the United States and India, to add additional supplies after oil prices. oil increased by 50% this year.

However, the oil cartel agreed on Monday to stick to an existing pact to increase oil production by 400,000 barrels per day (bpd) in November, ignoring calls to pump more oil.

John Driscoll, chief strategist at JTD Energy Services, said the OPEC + move was a “very cautious step” until one considers the ongoing energy crises and possible supply disruptions.

“What I think [is] more worrying for everyone… what happens during the winter? Are we going to have another frost in the Arctic? ”Driscoll told CNBC’s“ Squawk Box Asia ”Tuesday.

He pointed to the fuel shortage in the UK – with long lines of cars waiting to buy petrol, as well as “fights”. In the UK, people panicked while buying fuel, causing shortages and straining fuel supply chains.

“When you go into winter, what you really have to worry about is this non-discretionary request,” Driscoll said. Non-discretionary demand refers to essential expenses for everyday goods and services.

Driscoll said what’s particularly concerning is thin inventory, or if there is “any kind of supply chain problem.”

Supply chains have been strained by the fuel-buying panic in Britain and partly due to a significant shortage of truck drivers due to Brexit and the UK’s new trade relationship with the EU. This led the UK to resort to the military to deliver fuel.

“You might see a spike off the charts – that’s a scenario there,” Driscoll said of oil prices. “I really don’t hear anyone talking about the prospects for a mild, moderate winter. I think, given all the uncertainties about the weather and climate change, we could be in for a wild ride here.”

Oil prices hit a three-year high after OPEC + decision. Brent was at $ 82.47 a barrel Wednesday morning during Asian hours, and WTI was at $ 78.84.

But energy prices were already on the rise this year, with crude surging more than 50% since the start of the year, adding to inflationary pressures.

Oil prices climbing to $ 100 a barrel is possible, but it’s not sustainable, Driscoll said.

“I see this as a kind of lower probability scenario. That is, if everything goes wrong, if we have arctic weather, if we have issues, failures in deliverability, chains of supply. It’s a possible scenario but I don’t see it likely to be sustainable, “he said.

Driscoll also highlighted the energy crisis in China, which led to widespread disruption when local authorities ordered power cuts to many factories.

As the country grapples with the energy shortage, demand for natural gas and coal has increased as Beijing has ordered energy companies to ensure sufficient supply to avoid blackouts during the winter, according to Reuters.

In Europe, the region is also grappling with its own energy crisis with a massive gas shortage.

This confluence of crises leading to gas shortages is expected to boost demand for oil ahead of what is expected to be a colder winter, analysts have warned.

– CNBC’s Sam Meredith and Chloe Taylor contributed to this report.