Barclays said Brent crude could rise to around $80 per barrel in the event of a material supply disruption, as U.S.-Iran tensions remain elevated.
“While it is entirely possible that an escalation does not lead to a supply disruption and the $3-5/b risk premium in oil prices fades quickly, even a 1 mb/d supply outage would further question the widely expected supply glut and push Brent to $80/b, in our view,” the bank said.
Oil prices rose about 2% on Friday, with traders bracing for supply disruptions as nuclear talks between the U.S. and Iran had yet to reach an agreement. Brent settled at $72.48 a barrel. U.S. President Donald Trump expressed disappointment on Friday about U.S. negotiations with Iran over its nuclear program and warned that “sometimes you have to use force,” amid a massive military presence in the region that could presage strikes on the Islamic Republic.
“The pushback to our view that geopolitical tensions still pose asymmetric upside risk for oil prices is based primarily on recent history, which argues in favor of fading the risk premium around these events,” Barclays said in a note.
On the other hand, if no material supply disruption occurs and Iran’s response to any U.S. strikes fails to match the heated rhetoric, Barclays said oil prices could decline by $3 to $5 per barrel, all else equal.
It also cautioned that the market is structurally tightening, with low and declining spare capacity, tight inventories and firm demand.
(Reporting by Anushree Mukherjee in Bengaluru Editing by Rod Nickel)