After escalating conflicts in the Middle East, energy analysts and investment banks expect the price of oil to rise to $90 this week and possibly $100 a barrel if traffic jams in the critical Strait of Hormuz continue.
Brent was already up more than 10% to $80 a barrel in Asian trading on Monday morning. Given the level of fighting and already disrupted traffic through the Strait of Hormuz, analysts expect further escalation at least this week.
Citigroup expects Brent crude to trade in the $80 to $90 per barrel range for at least next week on a bank base case.
“Our basic view is that Iran’s leadership changes, either that the regime changes enough to stop the war within 1-2 weeks, or the United States decides to see a change in leadership and at the same time halt Iran’s missile and nuclear programs.”
Goldman Sachs sees a real-time risk premium of $18 a barrel in oil prices. However, if only 50% of the flow through the Strait of Hormuz was stopped for a month, the war risk premium for prices would average $4 per barrel, according to Goldman.
Wood Mackenzie sees disruptions in oil flows to push oil prices above $100 per barrel.
Related: Magnet Wars: How the US Plans to Break China’s Grip on Rare Earths
“Higher oil and gas prices are certain as the Strait of Hormuz closure threatens to disrupt 15% of the world’s oil and 20% of global LNG supplies, with oil prices likely to rise above $100/bbl if tanker flows are not restored soon,” WoodMac said in a press note on Monday. Wood Mac said in a press release on Monday.
In the current scenario, oil prices above $100 per barrel are possible if supply flows do not reset quickly, said Alan Gilder, SVP of refining, chemical and oil markets at Wood Mackenzie.
Gilder added, given the high uncertainty about events in the Middle East, it is plausible that export flows will take several weeks to establish themselves in the most optimistic scenario, in which the Iranian regime chooses to cooperate with the United States.
“During this time, oil prices are very vulnerable to rising,” Gilder said.
“The most recent comparison is in the early days of the Russia/Ukraine conflict, when fears of Russian supply losses drove oil prices above $125/bbl.”
By Tsvetana Paraskova for Oilprice.com
More great reading from Oilprice.com
