Goldman Sachs said oil prices could rise by $20 a barrel if Iran's oil production was affected.
U.S. crude futures rose about 5% at one point on Thursday and were trading higher again on Friday morning on concerns that Israel could retaliate against Tehran's missile attack earlier this week by hitting Iran's oil industry.
Daan Struyven, co-head of global commodities research at Goldman Sachs, said in an interview on Friday that if Iran's production declines by 1 million barrels per day are sustained, oil prices are expected to rise by about $20 a barrel next year.
That’s assuming OPEC+ doesn’t respond by increasing production, Struyven added. If major OPEC+ members like Saudi Arabia and the UAE offset some of their production losses, the market could see a small gain of just under $10 a barrel.
Oil markets have seen limited disruption since the start of the armed conflict between Israel and Hamas, with prices pressured by rising U.S. production and weak demand from Asia.
However, market sentiment may be shifting this week. U.S. crude oil prices rose for a third straight session amid heightened regional tensions following Iran’s ballistic missile attack on Israel. Industry observers have sounded the alarm in recent days about real threats to supply.
Iran, a member of OPEC, is a major player in the global oil market. It produces nearly 400 barrels of oil per day, and if Iran's oil infrastructure becomes a target of countermeasures considered by Israel, it is estimated that about 4% of the world's supply could be threatened.
Saul Kavonic, senior energy analyst at MST Marquee, cited the potential risk to Iran's Kharg Island, which is responsible for 90% of the country's crude oil exports. "The bigger concern is that this could be the beginning of a further expansion of the conflict, which could affect shipping through the Strait of Hormuz," he added.
Other analysts echoed that sentiment, arguing that supply disruptions in the Strait of Hormuz would be a concern if Israel struck Iran’s oil industry.
Iran has previously threatened to disrupt flows through the Strait of Hormuz if its oil sector is affected.
The strait between Oman and Iran is a vital passage through which about one-fifth of the world's daily oil production passes, according to the U.S. Energy Information Administration. The strategic waterway connects crude producers in the Middle East with major global markets.
When asked by reporters on Thursday whether the United States would support Israel in striking Iranian oil facilities, U.S. President Joe Biden responded: "We're talking about it. I think it would be a little bit - one way or another." Oil price analysts saw the comments as a catalyst for higher prices.
"In the case of an all-out war, Brent crude prices could surge above $100 a barrel, and any move to block the Strait of Hormuz could threaten prices of $150 a barrel or more," Fitch Solutions' BMI wrote in a note published Wednesday.
Analysts at BMI said that while the likelihood of all-out war was "relatively low", the risk of miscalculation by either side had now increased.
While some industry analysts believe OPEC+ has enough spare capacity to compensate for disruptions in Iranian exports if Israel strikes Iran’s oil infrastructure, much of the world’s spare oil capacity is concentrated in the Middle East, especially in the Gulf states, which could also be at risk if the conflict escalates further.
Article forwarded from: Jinshi Data