According to Reuters, the conflict between Iran and Israel has raised geopolitical risks for the oil market in the future, leading some banks to increase their forecasts for oil prices.
Citi (US) on April 15 raised its short-term forecast for oil prices to $88/barrel from the previous $80 due to higher risk premiums. However, Citi said it believes the market is currently underestimating the possibility of a full-scale conflict between Iran and Israel that could push oil prices above $100/barrel.
Citi further said that any easing of tensions could trigger a significant correction to the downside in oil prices, back into the high $70s or low $80s/barrel.
Two senior Israeli ministers have signaled that retaliation is not imminent and that Israel would not act alone.
Analysts at Societe Generale have warned that geopolitical risks could impact crude oil prices in the near term.
Socgen raised its Brent crude price forecast to $91/barrel in the second quarter and WTI to $87.5, while expecting Brent to average $86.8 and WTI to average $83.3 in 2024.
“We continue to see direct military action between the US and Iran as a non-negligible risk, but the implied 5% to 15% probability of such a scenario in oil prices could easily translate into an oil price spike well above $140,” Socgen added.
Meanwhile, Brent crude for June fell 81 cents, or about 0.9%, to $89.64 a barrel by 13:35 GMT. US crude for May fell 69 cents, or about 0.8%, to $84.97.
The world’s largest bank by market capitalization, J.P. Morgan, has said the oil outlook likely hinges on any military response by Israel to the Iranian attack.
“Beyond any short-term geopolitical spikes, our base case Brent forecast remains at $90/bbl through May,” J.P. Morgan said.
“Were we to see an unexpected supply disruption — such as a complete outage in Libya or damage to Russian port infrastructure — prices could certainly spike again, potentially back toward $100/bbl,” said Viktor Katona, lead crude analyst at data analytics firm Kpler.
Earlier this month, the third-largest oil refinery in Russia was attacked. Reuters calculations showed that around 14% of Russia’s refining capacity has now been shut down due to drone strikes by Ukraine, as the conflict enters its third year.
Source: Reuters
