Global Brokerages Bet Oil at $90-120/bbl

WITH ESCALATION IN the West Asia conflict and Iran's plan to close the Strait of Hormuz, one of the world's largest shipping routes, the price of crude oil, the most widely tracked commodity worldwide alongside gold, is in the spotlight.

- NESIL STANEY

At least five major global brokerages are betting on a sharp spike in oil prices to $90-120 while others said spare capacity could mitigate supply imbalances.

Citi believes US efforts would focus on a quick reopening of the Strait, though a disruption of about 3 million bpd over a multi-month period could push prices to $90. HSBC advised clients to build portfolios resilient to political shocks. UBS said while the US has increased defense capabilities in the region, not all the damages can be avoided. Oil prices could rise to $90 or higher, warned UBS.

Morgan Stanley, Goldman Sachs, and Deutsche Bank said oil prices may top $100. Brent has risen 13% since the Iran conflict began on June 13, while WTI has gained around 10%. Significant disruption to oil and natural gas supply is unlikely given global incentives to try and prevent a sustained and very large disruption.