The oil market is now factoring in a one in 5 probability of a cloth disruption in Gulf power manufacturing flows, analysts at J.P. Morgan, together with Natasha Kaneva, head of worldwide oil and commodities analysis on the firm, stated in a analysis notice despatched to Rigzone by Kaneva on Monday.
“The geopolitical threat premium is already not less than partially mirrored in present oil costs, that are buying and selling at just below $80 – $12 above our model-derived honest worth of $66 for June,” the analysts said within the analysis notice, which was despatched to Rigzone earlier than information of a ceasefire emerged.
“This implies a one in 5 probability of a worst-case situation, the place the broadening of the battle might impression flows within the Strait of Hormuz or {that a} extra basic Center East conflagration might ignite retaliatory responses from main oil producing international locations within the area accountable for a 3rd of worldwide oil output,” they added.
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“Beneath this extreme final result, we estimate oil costs might surge to the $120-130 per barrel vary,” they continued.
Within the analysis notice, the J.P. Morgan analysts said that, past the short-term spike induced by geopolitics, their base case for oil stays anchored by their supply-demand steadiness, which they stated exhibits that the world has sufficient oil.
“Aligning with our projections, world oil inventories have risen by virtually 240 million barrels since February, with a 50 million barrel improve within the OECD, 75 million barrels in China, and the remaining distributed elsewhere,” they added.
“Brent oil costs have averaged just below $67 a barrel quarter up to now, which is exactly consistent with our forecast of $67 per barrel for 2Q25,” they continued.
“Primarily based on our ahead bodily oil balances, oil is anticipated to commerce within the low to mid $60 vary for the rest of 2025, and settle at $60 in 2026, assuming the chance premium absolutely dissipates by then – a seemingly bold expectation at current,” they went on to state.
The J.P. Morgan analysts said within the notice that the primary cause for this stability is that power infrastructure has largely been spared from direct assaults thus far, highlighting that “not a single barrel of oil has been misplaced”.
“Israel has focused two fuel processing services on Iran’s southern coast, which convert fuel into methane and LPG for home consumption, in addition to a gasoline depot in Tehran,” the analysts added.
“The assaults point out Israel’s technique is to weaken and disrupt Iran’s home fuel and gas provide chains, aiming to create home shortages slightly than focusing on the nation’s oil and fuel exports, which might have broader implications for world markets,” they went on to state.
Rigzone has contacted the Iranian Ministry of International Affairs, Israel’s Ministry of International Affairs Spokesperson, Oren Marmorstein, OPEC, and the Gulf Cooperation Council Basic Secretariat for remark on J.P. Morgan’s analysis notice. On the time of writing, not one of the above have responded to Rigzone.
J.P. Morgan’s analysis notice confirmed that the corporate anticipated the Brent crude oil worth to common $67 per barrel within the second quarter of 2025, $63 per barrel within the third quarter, $61 per barrel within the fourth quarter, and $66 per barrel total this 12 months.
In its newest quick time period power outlook (STEO), which was launched on June 10, the U.S. Power Info Administration (EIA) projected that the Brent spot worth will common $65.53 per barrel within the second quarter, $62 per barrel within the third quarter, $61 per barrel within the fourth quarter, and $65.97 per barrel total in 2025.
In a BMI report despatched to Rigzone by the Fitch Group on June 6, BMI projected that the entrance month Brent crude worth will common $68 per barrel this 12 months.
To contact the writer, e mail andreas.exarheas@rigzone.com
