Oil Prices To Retain US$5-US$10 Risk Premium Per Barrel Despite US-Iran MoU -- Rystad Energy
KUALA LUMPUR, June 16 (Bernama) -- Crude oil prices are expected to retain a residual geopolitical risk premium of between US$5 and US$10 per barrel despite the virtual signing of the United States (US)-Iran memorandum of understanding (MoU), said Rystad Energy.
It said the probability of a narrow agreement between Washington and Tehran has been raised to 55 per cent from 40 per cent previously amid expectations that both sides will avoid renewed hostilities and support a gradual recovery in oil flows through the Strait of Hormuz.
“The probability distribution is concentrated around a managed de-escalation outcome: enough progress to avoid renewed fighting and restore a meaningful share of Hormuz traffic, but not enough trust or political compromise to fully remove the underlying geopolitical risk.
“A full resolution to the conflict is still possible but highly challenging, while a return to fighting is lower probability given the high costs and limited incentives for either side to re-escalate immediately,” it said in a statement today.
Rystad Energy head of geopolitical analysis Jorge Leon said while the US-Iran MoU is an important de-escalation, it is not a resolution, and markets should not price it as one.
He said the risk of an immediate military breakdown has declined meaningfully, but the risk premium does not disappear with a signature; it just changes shape.
“Flows through the strait will take time to normalise even if the MoU holds, and the ceasefire remains exposed to Lebanon, to sequencing disputes, and to the gap between what both sides think they signed.
“We are not going back to a pre-crisis oil market, but instead we are entering a more uncertain, more volatile one,” he said.
It was reported that a memorandum of understanding (MoU) between Iran and the US had been finalised and would be officially signed in Geneva, Switzerland, on Friday.
-- BERNAMA