A top oil analyst explains why oil is about to surge to $120 - and stay there for 2 years as Europe battles supply shocks

Good morning. Phil Rosen here, reporting from a dark and cold New York City. If you've even peeked at markets recently, odds are you've caught some of the massive blast of crypto news that Sam Bankman-Fried's FTX unleashed last week.

It's drawn comparisons to Lehman Brothers' epic 2008 implosion, and somehow billions of dollars evaporated into thin air. Plus, the legendary writer behind "The Big Short" and "Moneyball" is apparently already working on rights to a forthcoming book on SBF, even though he hasn't written a single word yet.

But to keep you from getting bogged down in what some people say are make-believe assets, today I want to turn to the real world.

Like a bad habit, Europe's energy crisis remains ongoing and serious, even though people don't seem to be talking about it as much. Come December, oil prices in particular will come under pressure as the European Union imposes fresh sanctions on Russia.

Expensive oil is nothing to scoff at. Usually, rising crude prices weigh on the economic outlook for consumers and companies, and more pessimistic forecasts can then weigh on earnings expectations — which means stock prices can fall.

I caught up with a top analyst from across the pond to find out more.

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1. Oil prices are about to hit $120 a barrel, and they're likely going to stay high for two years. That was one of the more jarring predictions Livia Gallarati made from London during our video call yesterday.

The Energy Aspects senior analyst said that Europe is facing troubling supply issues that are unlikely to go away anytime soon.

Once new sanctions ban seaborne Russian crude imports to Europe, she explained, EU nations will have to fully cut themselves off from a neighboring, long-standing source of oil, and instead rely on more distant suppliers like the US or Middle East.

Russian crude production could see as much as 2 million barrels a day go offline by early next year when an additional ban on refined fuels kicks in, according to Energy Aspects, which would deliver a huge blow to global supplies and push prices higher.

"Brent is going to be structurally higher and it will feed into pump prices for the consumers," Gallarati told me. "There's no doubt about that."

And in Europe, governments aren't doing enough to reduce demand. They are actually doing the opposite in proposing subsidies and tax incentives to help people pay for soaring energy costs, she said.

While it's a good thing socially and politically, it hurts markets because it doesn't give supply the chance to catch up with demand.

"Market prices are going to go through the roof, and eventually somebody is going to have to pay the bill," Gallarati noted.

Meanwhile, Beijing's zero-COVID policies have kept demand muted there, which has reduced competition for energy supplies. But China's reopening could send prices even higher, Gallarati said.

Add that to uncertainty around OPEC+ policy and the Biden administration's countermoves, and more tumult seems possible.

"OPEC's been very protective of making sure there's a floor to prices," Gallarati said. "And now there's been talk about limiting exports out of the US to the rest of the world. So what happens with these policies will be another big thing to watch for prices."

What's something that you think could help ease oil prices heading into 2023?

Let me know on Twitter (@philrosenn) or email me (prosen@insider.com).

In other news:

2. US stock futures rise early Tuesday, buoyed by the fall in US inflation and a more positive outlook for China's economy. Here are the latest market moves.

3. Earnings on deck: Walmart, Home Depot Inc., and more, all reporting.

4. Buy these stocks that are minting profits from their investments while keeping ultra-low valuations. Bank of America's Research Investment Committee said these mature growth names look cheap, but still look set to deliver outsized returns. Here are the 16 companies to add to your portfolio now.

5. Billions of dollars seem to have disappeared with FTX's collapse. But how does that even happen? The disaster is being compared to Lehman Brothers' 2008 implosion, but that bank had more than $600 billion in real assets that were salvageable. FTX, on the other hand, has assets in illiquid cryptocurrencies that have almost zero value.

6. Jeff Bezos warned that a recession is looming and Americans should prepare for the worst. The Amazon chief has advised consumers and businesses to stockpile cash in the event of a downturn, and he thinks recession odds are heating up: "The economy does not look great right now."

7. Crypto investors are pulling bitcoin from exchanges at a rate of 106,000 per month. That's a near-record amount, and a result of the fallout from FTX's drama. Glassnode figures show that the floundering crypto exchange has shaken faith in centralized platforms across the sector.

8. This 25-year-old real estate investor isn't deterred by soaring mortgage rates. "It's a much better time to buy now than this time last year," Karina Mejia said. She owns six properties in Boston and Georgia and is now looking to expand her portfolio despite current economic headwinds.

9. Experts from UBS named 33 stocks that will benefit the most as inflation finally starts to ease. The analysts are calling for historically weak global growth in 2023, which will set the stage for a certain batch of stocks to climb. See the full list here.

10. Elon Musk dropped more clues about a potential Tesla buyback. In a tweet responding to a shareholder's comment urging a buyback, the CEO said, "This is up to the Tesla board." Shares of Tesla have fallen 45% this year.

Keep up with the latest markets news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.

Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com

Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.