Oil Price Forecasts - June 12

[dan_s]

Bloomberg

Analysts are making credible arguments that oil could slump into
the $40s -- or soar to $120. Even for a commodity with a volatile history like
oil, that price range is remarkable.

Late on Wednesday, Brent crude, the international benchmark, briefly rose
above $70 a barrel for the first time since April. On Thursday, it gave back
less than 1% of its gains -- staying just under $70.

Oil has seen a major turnaround in the past few weeks.

Brent had fallen to $60 in May, when President Donald Trump's trade war heated
up and threatened to derail oil demand. But in the past few days, oil has
surged because of progress on a U.S.-China trade deal and heightened tensions
between the U.S. and Iran over Iran's nuclear program.

Iran said it could attack U.S. military bases if talks fall apart, and
strategists think Israel could strike Iran, escalating the conflict. The U.S.
is ordering a limited evacuation of its embassy in Iraq, according to the
reports, and the British Navy issued a warning to ships traversing the Persian
Gulf and nearby waterways.

If a broader war breaks out, it could have an enormous impact on the oil
market.

At several moments in recent history, Iran has threatened to block the Strait
of Hormuz, a water route that connects the Persian Gulf to major Asian
markets. The strait facilitates 30% of the world's seaborne oil trade and 20%
of trade in liquefied natural gas, according to JP Morgan.

Natasha Kaneva, JP Morgan's head global commodities strategist, sees a very
low probability that Iran would block the strait, which would alienate the
largest customers for its oil. For now, Kaneva is sticking to her price target
of low-to-mid $60s for the rest of the year.

But Kaneva won't full dismiss the possibility of Iran blocking the strait.

"This suggests an elevated 7% probability of a worst-case scenario, where the
price reaction is exponential rather than linear," she wrote.

In the case of a major disruption to supplies, oil could rise as high as $120
a barrel, a level they haven't hit since right after Russia invaded Ukraine in
2022, she predicted.

At the same time, there's a strong bearish argument.

Jim Burkhard, global head of crude oil research at S&P Global Commodity
Insights, thinks oil could even fall into the $40s this year as OPEC and its
allies flood the market in the coming months. < This is BS. OPEC is not "flooding the market with oil".
OPEC+ raised quotas not production. Actual production increase won't even be 50% of the quota increases.

Demand is set to rise about 390,000 barrels a day in the second half of this
year, but supply could surge 2.2 million barrels. The basics of supply and
demand point to oil falling. < It makes no sense to me that Saudi Arabia would allow this to happen.

"It's not instantaneous but it's something that we could see materialize later
this year," Burkhard wrote earlier this week.

For now, geopolitical angst is proving much more compelling to investors than
the supply-and-demand story.
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Always keep in mind that most of the Wall Street Gang does want low oil prices, because they want low inflation that will allow the Fed. to lower interest rates.

[dan_s]

Macro Voices interview with an oil market expert, Rory Johnson

https://macrovoices.podbean.com/e/macrovoices-484-rory-johnston-crude-oil-forward-curve-conundrum/?token=b41ba60e71991b0625d705d71e8f9957