Russia's limited capacity to increase crude oil production could boost soaring oil prices and further push up inflation in the United States.

Brent crude hit a high of $86.71 a barrel on Monday. After rising 10% in the previous two weeks, Brent oil has surpassed its October high and hit a seven-year high of $115 in 2014. WTI crude is not far behind, still slightly below last year's peak, but at a high of $84.78 a barrel.

Russia's limited capacity to increase production may further amplify the current rally in crude oil.Under the OPEC+ agreement, Russia was supposed to increase its crude oil supply by 100000 barrels a month, but the country's production production stagnated in November and fell below the OPEC+ quota in December.

This state of malaise is likely to continue in the future.Wall Street banks now generally expect Russia to grow no more than 60,000 barrels a day in real terms in the first half of 2022.

Bank of America Corporation analyzed and saidThe Russian oil industry was on the sidelines last year because of the uncertainty surrounding the impact of the coronavirus on demand.. Some Russian oil producers began to restrict production last year after some projects lost tax breaks. By the end of November last year, Russia's overall crude oil drilling rate had fallen by 4.5% compared with the same period in 2020.

Bloomberg previously quoted Russian Deputy Finance Minister Alexey Sazanov as saying that the Russian government is prepared to consider some tax cuts as early as 2023, provided that OPEC+ production cuts end this year.

"inability to increase production" is not just a Russian problem. Morgan Stanley analyst Martijn Rats pointed out that the current global spare crude oil production capacity will fall to less than 2 million barrels per day by the middle of this year. In addition, there are supply problems in Libya, Kazakhstan, Nigeria, Syria and Yemen, while member countries such as Angola and Malaysia lack the capacity to increase production due to lack of investment.

Wall Street has previously mentioned that high energy costs have been the key reason for high inflation in the United States, so the US government has repeatedly called on OPEC to increase production to fill the supply gap.

Helima Croft, head of global commodities strategy at RBC Capital Markets, said:

Now that the oil market is in such a dangerous period, the Biden administration is absolutely prepared to ask OPEC for more crude oil.

Under this situation, Goldman Sachs Group, the "flag bearer of crude oil", has begun to wave the flag and shout.

Goldman Sachs Group's head of energy research, Damien Courvalin, told Bloomberg that oil prices would reach $100 a barrel in the third to fourth quarters of this year when supply growth was too slow to keep up with demand. In addition, Goldman Sachs Group raised the Brent oil price forecast for 2023 from $85 to $105a barrel.