Panoramic view of the Isfahan refinery in Iran on November 8, 2023. The refinery is one of the largest in Iran and is considered the first in the country in terms of diversity of petroleum products.
Anadolu | Anadolu | Getty Images
Analysts told CNBC on Thursday that the oil market was too complacent given the risk of major supply disruptions in the Middle East, with one warning that crude futures could rise above $200 a barrel.
There had been speculation that Israel might plan to launch revenge attack Iran targets its oil infrastructure – a prospect that could give bearish energy market participants a rude awakening.
Iran is a member of the Organization of the Petroleum Exporting Countries (OPEC) and a major player in the global oil market. It is estimated that as much as 4% of global supply could be at risk if Iran’s oil infrastructure is targeted by Israel.
Bjarne Schieldrop, chief commodities analyst at Sweden’s SEB Bank, said on CNBC’s “Street Signs Europe” program on Thursday that escalating tensions in the Middle East could have serious consequences for the market.
“If… you do dismantle Iranian oil facilities and force exports to fall by 2 million barrels, the next question for the market will be what happens now in the Strait of Hormuz? Of course, that would increase the relationship with oil In comparison, the risk premium is significant,” Schildrop said.
Asked how high oil prices might rise in this scenario, Schillrop responded: “If you take away the Iranian facilities, you could easily go over $200.”
The Strait of Hormuz, a narrow but strategically important waterway between Iran and Oman, connects Middle Eastern crude producers to major markets around the world.
Oil prices have risen more than 4% since the start of the week as traders keep a close eye on rising geopolitical risks in the Middle East.
International benchmark Brent crude futures due in December rose nearly 2% to $75.32 a barrel on Thursday, while U.S. West Texas Intermediate crude futures rose nearly 2% to $71.60 a barrel, up more than 2.1% .
Israeli Prime Minister Benjamin Netanyahu on Tuesday pledged a military response to Iran’s ballistic missile attacks, insisting Tehran would pay for what he called a “big mistake.” His remarks came shortly after Iran fired more than 180 ballistic missiles at Israel.
Iranian President Masoud Pezeshkian said during a visit to Qatar on Thursday that Iran had “no intention of going to war with Israel.” However, he warned that Tehran would respond forcefully to any further Israeli actions.
Overview of Maxar satellite imagery of Iran’s Fortune Galaxy Mahshahr Oil Terminal.
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“It all depends on how the conflict escalates further, and I think it’s self-evident that Israel will retaliate after Iran’s latest attack – and that this will happen within five days of the first anniversary on October 7.” , said SEB’s Schieldrop.
“Is this going to be…a weak attack, like we saw in April, and then everything calms down? Or is this going to be a more intense attack, targeting military installations, potential nuclear facilities and oil Facilities are also being considered.
Complacency in energy markets?
Energy analysts warned that bearish sentiment prevailed in the market, although tensions in the Middle East threatened to reach a new boiling point.
“I do think from an oil market perspective, the market is so complacent right now,” Amrita Sen, founder and research director of Energy Aspects, told CNBC.Squawk Box Europe” Thursday.
“You see, since the Abqaiq incident in 2019, geopolitical risks have not resulted in oil supply losses.
She said geopolitical risks had not actually led to supply losses since Saudi Arabia shut down half of its oil production in 2019 following a drone attack on Abqaiq oil processing facilities.
“That’s why the market is tired,” she continued. “This is Bugek, this is Russia-Ukraine, but I do think this is a little different.”
An attack by Yemen’s Houthi rebels on Saudi Aramco facilities in 2019 prompted a sharp rise in oil prices at the time.
Asked about the prospect of Israeli retaliatory attacks on Iran’s energy infrastructure, Sen said the United States was likely to be unambiguous in its diplomatic messaging to the Jewish state.
“It’s certainly something that everyone is talking about, right? The United States is involved. I think we can’t forget the fact that the U.S. election is coming up in a few days, so I think their message is very clear: don’t attack energy infrastructure, Likewise, don’t attack nuclear facilities,” Sen said.
Meanwhile, John Evans, an analyst at oil broker PVM, said in a research report released on Thursday that historically, oil prices have shown “a negative response to missile attacks and explosions in multiple countries in the Middle East.” Very different and violent reactions”.
“It goes without saying that anything surrounding Israel will trigger a historic enthusiasm, but when it comes to oil, the involvement of a more influential Iran should be a boon for bulls,” Evans said.
“The expansion of the war and the damage it has caused will need to be demonstrated before oil market participants can shake off widespread skepticism,” he added.
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