Oil prices could top $150 per barrel if energy flows through the Strait of Hormuz remain disrupted through the middle of May, according to JP Morgan.
Prices are headed to $120-$130 per barrel in the very near term, the investment bank said in a note carried by Reuters.
At Thursday’s close, oil prices surged, with the U.S. benchmark WTI Crude soaring past Brent Crude and settling at $111.50 per barrel. The international benchmark closed at $109 a barrel on Thursday, the last trading day of this week, as markets are closed on Good Friday.
JP Morgan’s base-case assumption is that the energy flows would ultimately resume flowing through the Strait of Hormuz, where vessel traffic has collapsed since the beginning of March.
Iran selectively allows certain ships to transit the world’s most critical oil chokepoint, through which 20% of daily global oil and LNG passed before the war.
Even if the Strait of Hormuz were to open unconditionally to all traffic today, the global oil production and refining supply chains would take at least three to six months to normalize to pre-war levels, June Goh, Senior Oil Market Analyst for Sparta Commodities, said in an analysis last week.
This week, the UK hosted a virtual meeting of more than three dozen countries to discuss pathways to reopen the Strait of Hormuz to free vessel traffic.
The countries discussed ideas, including sanctions and increased international diplomatic pressure, including through the UN, “to send clear and coordinated messages to Iran to permit unimpeded transit passage through the Strait of Hormuz and to comprehensively reject the imposition of tolls on vessels which seek to pass through,” said the UK Foreign Secretary, Yvette Cooper, who chaired the meeting.
Yet, there are no signs of imminent reopening of the Strait of Hormuz, which prolongs the period of choked supply to the market.
Earlier this week, energy consultancy FGE NexantECA said that oil prices could jump to $200 per barrel and even higher if the Strait of Hormuz remains near-closed as it is at the moment for six more weeks.
Last week, analysts at Macquarie Group warned that oil prices could hit a record $200 per barrel if the war in the Middle East drags on through the entire second quarter.
By Tsvetana Paraskova for Oilprice.com
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