An Extended Conflict in the Middle East Increases Risks of Supply Disruption in Crude Oil Market
An extended conflict in the Middle East is now the “most likely” scenario after the US escalation over the weekend, commodities analysts at ANZ said on Monday morning.
“Risks of supply disruption in the crude oil market have risen sharply following an escalation in the Israel-Iran conflict,” Daniel Hynes and Soni Kumari, commodity strategists at the Australian lender, wrote in a note.
“The most likely scenario (we estimate a 50% probability) in our view is an extended conflict. This would see supplies come under direct threat,” they said.
“However, the oil market is better equipped to respond to that than it has been in the past,” they added, noting that Opec has more than 6mn barrels a day of spare capacity that can be quickly activated.
They expected a price range of $75-$85 a barrel “for this scenario”.
The recent escalation in the Israel-Iran conflict has heightened concerns about potential supply disruptions in the crude oil market. Analysts at ANZ believe that an extended conflict in the Middle East is now the most likely scenario, with a 50% probability according to their estimates.
Daniel Hynes and Soni Kumari, commodity strategists at ANZ, emphasized the direct threat to oil supplies in the region. However, they also pointed out that the oil market is more prepared to handle such disruptions compared to the past. With Opec having over 6 million barrels a day of spare capacity that can be quickly activated, the market has a buffer to mitigate any supply shocks.
Despite the increased risks, ANZ analysts projected a price range of $75-$85 per barrel for this scenario. This reflects the market’s ability to respond to potential disruptions and the presence of spare capacity to stabilize prices.
As tensions continue to escalate in the Middle East, the oil market remains on high alert for any developments that could impact supply chains and prices. ANZ’s analysis provides valuable insights into the current situation and the market’s ability to navigate through potential challenges.
