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FILE PHOTO: Oil tankers pass through the Strait of Hormuz, December 21, 2018. Oil prices rose Wednesday as escalating tensions between the U.S. and Iran fuel concerns over further disruptions to Middle East energy supplies. U.S. benchmark West Texas Intermediate futures for October delivery jumped 1.75% to $94.66 a barrel.
Futures for Brent crude, the international benchmark, added 1.55% to $99.44 a barrel. The U.S. military destroyed five Iranian crude tankers Tuesday in retaliation for attempted attacks on an American warship. The U.S. warship successfully evaded Iranian attack and no American personnel were harmed, according to a Centcom statement.
The escalation in the U.S.-Iran conflict, now in its seventh month, is raising the risk of oil prices surging above $120 a barrel as attacks on shipping intensify, according to Daan Struyven, co-head of global commodities research at Goldman Sachs. "It's definitely plausible," Struyven told CNBC's "Squawk Box Asia" when asked whether oil could reach $120 a barrel. Goldman's base case remains for Persian Gulf exports to gradually recover as producers adapt to disruptions, including through alternative shipping routes and eventually additional pipeline capacity.
However, recent escalation has increased the chances of a more bullish scenario where exports fail to recover in the coming months, potentially causing Brent crude to exceed $120. "The developments over the last few days do suggest that alternative upside price scenario, where exports actually stagnate over the coming few months, and where Brent exceeds $120," Struyven said. U.S.-Iran military action had been on pause for about a month, with Washington applying economic pressure on Tehran before resuming strikes towards the end of last month.
Source: CNBC
