UBS said oil prices could spike as high as US$100 a barrel in the next year, pointing to production outages in Libya and Canada and the U.S. administration’s move to “aggressively” curb Iran’s oil exports by November.
UBS raised its six-month and 12-month Brent forecasts to US$85 a barrel, from US$80 and US$75 respectively previously. It raised its WTI forecasts to US$81 in three months and US$78 in both six and 12 months.
“We also do not rule out a spike in oil prices to the US$100 a barrel mark over the next 12 months, particularly if further supply disruptions materialize,” UBS said.
“Saudi Arabia, its Gulf allies and Russia are ramping up production to offset production losses from Venezuela, resulting in lower spare capacity,” UBS said in a note last week. “With spare capacity dwindling and Iranian output set to decline considerably, the oil market will likely be vulnerable to additional supply disruptions.”
It noted that global spare capacity, or the production that can be brought on-stream at short notice, could fall to a 10-year low in the next 12 months, leaving “a thin margin of error.”
The Trump administration has violated the nuclear treaty with Iran and has reimposed sanctions on the Middle Eastern country, giving companies and countries a November deadline to stop importing Iranian oil.
Stronger U.S. oil production growth isn’t likely to be able to offset oil demand growth or fill gaps from outages in Venezuela, Canada and Libya, it said.
“Even if rising trade tensions slow down economic growth this year, the hit to oil demand growth would likely be offset by slower U.S. crude production growth over the next 12 months,” UBS said.
Nymex WTI crude oil futures from August were up 1.18 percent at US$73.80 a barrel on Friday, while ICE Brent crude futures for September were down 0.36 percent at US$77.11, according to Bloomberg data.