$100 is possible — Citigroup
Citigroup Inc.’s base case is that tensions remain “extremely high” in the Middle East, supporting prices. This prompted the bank to raise its near-term price forecast, with the three-month target for West Texas Intermediate increased by $8 per barrel.
“What is not being priced in by the current market, in our view, is the potential continuation of direct conflict between Iran and Israel, which we believe could see oil prices rise as high as +100 dollars per barrel, depending on the nature of the events,” he added. »wrote analysts including Max Layton in a note.
“Risk premium” — Goldman Sachs
“We estimate that oil prices already reflect a risk premium of $5 to $10 per barrel relative to the risks of a decline in supply,” before the Iranian attacks over the weekend, analysts at Goldman Group Sachs Inc., including Daan Struyven. “Israel’s potential response to the Iranian attack is highly uncertain and will likely determine the extent of the threat to regional oil supplies. »
Iranian crude production has increased by more than 20% over the past two years to 3.4 million barrels per day, or about 3.3% of global supply, according to analysts. So, “if the market were to price in a higher probability of Iranian supply reduction, then this could contribute to a higher geopolitical risk premium,” they said.
More risks for direct military action — SocGen
“We believe the immediate risk of direct confrontation has been contained – at least for now. At the same time, the tail of risk allocation has become heavier with escalation paths involving the United States multiplying,” said Benjamin Hoff, global head of commodities research at Societe Generale SA .
Since the Iranian attack, the risk of direct military action between the United States and Iran has increased from 5% to 15%, and Brent prices will rise well above $140 in such a scenario, did he declare. The bank raised its Brent price forecast by $10 over the projection horizon to reflect the likely persistence of a geopolitical risk premium.
Calm worried — UOB
With the oil outlook remaining highly uncertain, prices are likely to rise to $100 a barrel or more if Iranian crude production is threatened, United Overseas Bank Ltd said. in a note. However, there is also a risk of a resumption of higher crude production from Saudi Arabia and the OPEC+ coalition, which could help stabilize energy markets, the bank said.
Watch for possible answers — ICG
Iran signaled that “that was it, it would do nothing else, but I’m just not sure that not responding is an option for Israel,” said Dina Esfandiary, senior adviser for the Middle East. Orient based in London at the International Crisis Group. “The only change in the situation is that the United States has made it clear that it will not support Israeli retaliation, which could therefore constrain Tel Aviv somewhat. »
Maintain your balance — SVB Energy
“If the recent retaliatory attacks between Iran and Israel cease at their current level, or if they refrain from escalating in the region without causing damage to oil production and export facilities, the market should maintain balance,” said Sara Vakhshouri, founder and president of SVB. Energy International LLC. “Market fundamentals appear stable, with OPEC+ closely monitoring the expected surge in demand for the summer season. In the event of a supply shortage in the market, OPEC+ could consider reducing voluntary cuts and increasing production.
“Already evaluated” — ING Groep
“The market had already priced in some form of attack, while limited damage and no loss of life meant the possibility of a more measured response from Israel,” said Warren Patterson and Ewa Manthey, strategists. of ING Groep NV, in a note. “How Israel will respond is now the main uncertainty. »
For oil, “the first risk is that oil sanctions are enforced more strictly against Iran, which could result in a loss of 500,000 to 1 million barrels per day of oil supply,” they said. Other possible outcomes include Israel attacking Iran’s energy infrastructure or Iran blocking the Strait of Hormuz.
“Into the Shadows” — RBC Capital Markets
The Israeli government’s response to the Iranian attack will determine whether the situation will lead to a broader war or whether the risks of escalation will diminish, according to analysts at RBC Capital Markets LLC, including Helima Croft. Significant Israeli retaliation could trigger a destabilizing cycle, they said.
“In such a scenario, we believe the risk to oil is not negligible given the Iranian seizure of the vessel in the Strait of Hormuz that preceded the missile and drone attacks,” the analysts said. Still, “if Israel withdraws or pursues a de minimis response, it appears that Iran could very well take advantage of the opportunity to bring this war back into the shadows.”
“Increased risks to oil security” — IEA
Iran’s air attacks on Israeli military installations have served as another reminder of the importance of oil security, while increasing the risk of volatility in oil markets, according to the International Energy Agency.
Global oil markets had already been strained before the Iranian retaliation, with new geopolitical tensions in the Middle East now placing emphasis on security of supply, it said in a briefing. Developments will be closely monitored, he added.
“Escalation unlikely” – ANZ Banking Group
“The fact that the attack was so well publicized suggests further escalation is unlikely,” said Daniel Hynes, senior commodities strategist at ANZ Banking Group Ltd. “The geopolitical risk premium is also high, so it does not justify further gains until Israel’s response to this attack is clear.
“The market needs further evidence that supply is more at risk before pushing up prices,” he added.
“Sigh of relief” – The capital once again
“The oil market can breathe a sigh of relief, at least for now,” said John Kilduff, founding partner of Again Capital LLC.
“There was a lot of buying on geopolitical tensions last week, but as the story evolved, what didn’t happen was a real escalation of tensions.”
“Stricter sanctions” — A/S Global Risk Management
“The situation is fluid, and if Israel signals that it will not retaliate, market tensions will ease,” said Arne Lohmann Rasmussen, head of research at A/S Global Risk Management. The market’s worst-case scenario is a closure of the Strait of Hormuz, although that outcome seems unlikely, he said.
Instead, “tighter sanctions against Iran are likely,” he said. “US sanctions against Iran are already very extensive, but Iran has still managed to increase its production and exports over the last year. »
