Crude oil prices have been lifted by the spike in U.S.-Iran tensions but are unlikely to rise much more, as an actual disruption to global crude supplies is needed to keep prices at current levels, Goldman Sachs analysts say.
Currently, February WTI (NYSEARCA:USO) +0.7% to $63.49/bbl and March Brent (NYSEARCA:BNO) +1% to $69.28/bbl, following Friday's big gains in response to the U.S. airstrike that killed Iranian military commander Qassem Soleimani.
The September strike on key oil producing facilities in Saudi Arabia showed the market has significant supply flexibility, Goldman says, seeing only "moderate upside" from current levels even if an attack on oil assets actually occurs.
Brent crude already was trading above the fundamental fair value of $63/bbl prior to the attack, buoyed by an "over-enthusiastic December risk-on rally" despite limited evidence of an acceleration in global growth, the firm says.
But the concern for oil markets is not limited to the Persian Gulf region, says Saxo Bank head of commodity strategy Ole Hansen, noting that Turkey's parliament recently authorized the government to send troops to Libya, which produced ~1M bbl/day of oil in 2019.
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