Oil prices could reach $90/bbl if Middle East conflict hits supplies
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OIL PRICES COULD REACH $90/BBL IF MIDDLE EAST CONFLICT HITS SUPPLIES
A supply disruption from escalating tensions in the Middle East could see oil prices rising to around $90 per barrel, levels not seen since last year when Hamas attacked Israel, a hedge fund trader said.
"If we see a real supply disruption in the Middle East, then we're ... talking high-80s (dollars/bbl) and potentially 90s," said Frank Monkam, senior portfolio manager and trader at hedge fund Antimo.
However, if the current situation stabilizes without impacting supplies from the region, oil prices could fall below $70/bbl, Monkam told the Reuters Global Markets Forum.
"Any kind of follow through from here would depend on what really happens more concretely from an energy disruption standpoint."
Brent futures LCOc1 rose more than 8% last week, while U.S. West Texas Intermediate (WTI) futures CLc1 soared 9.1% on the possibility that Israel could strike Iranian oil infrastructure in response to Iran's Oct. 1 missile attack on Israel.
The oil market faced a major risk of a short squeeze as the market was over-sold from a positioning standpoint, Monkam said. "So, it was already overdue for a bit of a bounce, regardless of the event in the Middle East."
When the Middle East conflict began a year ago, Brent stood at $88.15. Despite the recent rally, both Brent and WTI are trading below $80/bbl.
Monkam said his base case for oil prices was for tensions in the Middle East to remain contained from the supply disruption standpoint.
In that case, "I think we could even test the mid-60s (dollars/bbl) going into next year."
"At that point, it is really going to depend on how OPEC+ looks to adjust policy in light of a market that is going to look over-supplied, and if they will continue to be pretty lax with supply," he said.
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(Bansari Mayur Kamdar)
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