Oil prices could surge toward $80 a barrel if escalating geopolitical tensions disrupt Middle East crude supplies, analysts told CNBC on Friday, with energy market participants “on tenterhooks” after a U.S. airstrike killed key Iranian and Iraqi military personnel.
In the hours after Soleimani’s death, “one thing is clear: Iran will respond,” analysts at political risk consultancy Eurasia Group said in a research note published Friday.
“We expect moderate to low-level clashes to last for at least a month and likely be confined to Iraq. Iranian-backed militias will attack U.S. bases and some U.S. soldiers will be killed; the U.S. will retaliate with strikes inside of Iraq.”
Oil prices “will likely hold” around $70 a barrel, “but could make a run at $80 if the conflict spreads to the oil fields of southern Iraq or if Iranian harassment of commercial shipping intensifies,” they added.
“It has been always lingering as a potential threat … But I guess the timing of it was certainly surprising for the market,” Valentin Marinov, managing director and head of G10 FX research at Credit Agricole, told CNBC’s “Squawk Box Europe” on Friday.
“Maybe it is a bit early to draw really finite conclusions here about the overall impact on oil. After all, we just had the OPEC meeting where they reaffirmed cutting production further.”
“In addition, we also have expectations of oil output really peaking this year so chances are the move may continue,” Marinov said.
“If we were to see a lack of escalation then potentially this initial spike is probably about enough for now,” James Athey, senior investment manager at Aberdeen Standard Investments, told CNBC’s “Capital Connection” on Friday.
“But it does appear to be a pretty serious escalation that has occurred and for that reason I think the market is going to be on tenterhooks for a good while just yet,” he added.
“I don’t think that you will see a sustained rally in oil unless you get some surprise economic data that is stronger than people expect both in the U.S. and in particular Europe — which might be a swing factor here in terms of pushing that price up,” Robert Horrocks, chief investment officer of Matthews Asia, told CNBC’s “Capital Connection” on Friday.
“Other than that, I doubt this is the start of a severe spike in the oil price.”
Reference: CNBC
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