Bloomberg: $90-$100 per barrel is realistic oil price after US strikes on Iran

The average peak risk premium during major geopolitical conflicts over the past decade has been $25-$30 per barrel, which corresponds to a WTI price of $90-$100 per barrel, taking into account the “fair” price of $67 per barrel on June 20, writes Bloomberg Economics senior analyst Henik Fang.

Oil prices will increase significantly in the near future after the US strikes on three Iranian nuclear sites, warns Bloomberg Economics senior analyst.

According to him, in the event of increased speculation regarding the blockade of the Strait of Hormuz, WTI could exceed $ 100 per barrel. There are two oil pipelines bypassing this "obstacle": the Saudi "East-West" with a capacity of 5 million barrels per day (b/d) and the pipeline through the port of Fujairah (UAE), located in the Gulf of Oman, which has a capacity of 1.8 million b/d. According to the US Department of Energy, their total capacity at the moment is only 2.6 million b/d, which is insufficient.

As of June 12, the risk premium in the price of WTI oil was $ 1.03 per barrel, and on June 20 it had already reached $ 8.56 per barrel, the expert writes. According to him, the average peak risk premium during major geopolitical conflicts over the past 10 years has been $25-30 per barrel, which corresponds to a WTI price of $90-100 per barrel, given the “fair” price of $67 per barrel as of June 20.

In an “extreme situation,” WTI could jump to $125 per barrel, as happened at the beginning of the war in Ukraine, when the risk premium reached $58 per barrel, the analyst added.

We recall that JPMorgan predicts that if the situation worsens, the price of oil could jump to $130 per barrel.

Other analysts comment that speculation will be the main driver. In any case, the expectation is, including for Brent, that the price will exceed $100 per barrel. In addition, volatility in all markets is expected to increase to levels seen during the outbreak of the war in Ukraine.