BCA Research says oil's recent sell-off has largely removed the war premium, leaving risks skewed to the upside. The firm expects Brent to trade between $90 and $110 per barrel, and sees support for prices even if a ceasefire holds.
BCA Research says oil's month-to-date sell-off has priced out much of the war premium, leaving risks skewed to the upside. The firm expects Brent crude to trade in a range of $90 to $110 per barrel.
BCA said the decline reflects a shrinking risk premium rather than weaker fundamentals. It pointed to investor positioning, premiums paid for physical oil and futures market pricing, which all signal less fear of renewed supply outages.
However, tensions persist even as diplomacy gains traction. According to BCA: "Investors should not treat a rapid resolution to the conflict as a foregone conclusion."
Because the risk premium is already compressed, BCA said a peace deal would push prices down only modestly, while a meaningful escalation would send them to fresh highs for the conflict. Depleted inventories would also offer less of a cushion in a renewed disruption, the firm added, as governments focus on conserving stockpiles rather than releasing them aggressively.
Even in a durable ceasefire, BCA expects support for prices. Gulf producers are likely to maximize output and exports while conditions allow, but the firm said recovering demand, including Chinese imports, along with efforts to rebuild inventories, should absorb the extra barrels. That, BCA said, creates a floor for Brent.
Source: Investing.com
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