Brent crude could trade in the range of US$100 to US$120 per barrel if disruption at the Strait of Hormuz lasts more than three weeks, analysts at JPMorgan said in a research note to clients. This is according to a March 2 report from U.S.-based financial publication Barron’s.
Barron’s reported that the JPMorgan warning was issued as oil markets react to escalating tensions in the Middle East and the risk of supply disruptions through the Strait of Hormuz, a critical transit route for global crude flows.
“We estimate that if the conflict lasts more than three weeks, GCC [Gulf Cooperation Council] oil producers would exhaust storage capacity and would be forced to shut in production,” the JPMorgan analysts reportedly said. “Under this scenario, Brent could trade in the US$100 – US$120 range.”
Brent crude was trading near US$80 per barrel on March 2, after earlier touching above US$82, Barron’s reported. West Texas Intermediate was trading in the low US$70s.
The JPMorgan note cited storage constraints among GCC producers as a key factor that could tighten global supply if exports are disrupted for a prolonged period.
JPMorgan is one of the world’s largest investment banks and a major commodities market forecaster. Barron’s is owned by Dow Jones; it covers markets and investment news.
“The Strait of Hormuz, located between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. The strait is deep enough and wide enough to handle the world’s largest crude oil tankers, and it is one of the world’s most important oil chokepoints,” according to information posted to the U.S. Energy Information Administration website.
