JP Morgan expects Brent Crude to hit $85 a barrel over the next six months—with a spike to $90 likely—as the investment bank raised its oil price projections to reflect expectations of more Iranian oil barrels coming off the market when U.S. sanctions on Iran return in early November.
In its latest note, JP Morgan raised its Brent Crude forecast to $85 over the next six months, up from a previous forecast in the low $60s, expecting the Trump Administration to be tougher on Iranian sanctions than previous administrations. According to JP Morgan, a spike of Brent to $90 is likely, the analysts said in a note, as carried by Business Insider.
The investment bank now sees the U.S. sanctions cutting Iran’s oil exports by 1.5 million bpd due to the tougher U.S. policies on Iranian oil customers as they succumb to U.S. pressure and cut off oil trading with Iran, and it sees the U.S. Administration less likely to grant waivers to Iranian oil buyers.
“The main driver of this revision is a higher estimate of how much Iranian crude exports might decline due to multi-country respect for US sanctions that should come into effect on November 4th,” JP Morgan said in the note.
The U.S. equity market resilience and the strong economy could embolden U.S. President Donald Trump on all fronts, including NAFTA negotiations, tariffs, and Iran, according to JP Morgan analysts. The result of this overconfidence would be a risk of “a major miscalculation from sanctions that are tough to calibrate,” according to the investment bank.
While initial estimates of Iranian oil export losses were closer to 500,000 bpd, now more analysts are expecting that the losses could be higher than 1 million bpd.
The market will lose “well over 1 million” bpd from Iran with the sanctions, and “that can’t be made up,” John Kilduff of Again Capital told CNBC earlier this month, expecting WTI Crude prices at the end of this year at $85 to $90, and Brent Crude at $95 to $100.
RBC Capital Markets expects the losses of Iranian oil to exceed 1.2 million bpd in the first quarter of 2019, and Iran’s reaction to the U.S. sanctions in November could lead to some sort of “unintended military escalation,” which the markets are currently underestimating.
By Tsvetana Paraskova for Oilprice.com
