The expansion of the conflict in the Middle East will certainly have high costs for the global economy. Experts interviewed by this newspaper estimate losses at around $1 billion. The biggest question, however, is how much the price of a barrel of crude oil will jump after rising nearly 15% in the last six months. A new estimate from the Bank of America team puts Brent oil above $250 a barrel in the worst-case scenario, 70% above the peak recorded in July 2008.
The US bank is targeting the Strait of Hormuz between Oman and Iran, which connects oil producers in the Middle East with key markets in the Asia-Pacific region, Europe and North America. “If shipments via Hormuz, a hub for nearly 20% of the world’s oil and liquefied natural gas, were suspended for an extended period, oil prices could rise to over $250 per barrel,” the researchers estimate. Bank of America analysts. The increase would also affect natural gas, especially in the months before the start of winter.
The American company expects oil demand to continue to grow throughout the rest of the year due to the reopening of the Chinese economy. The strength of the Asian economy as a whole, including beyond China, means that appetite for crude oil will continue to grow in 2024. Beijing’s decisions are another geopolitical point of concern for Bank of America: China has decided to cut oil prices by 33%. The export quotas for gasoline, diesel and aviation fuel will be reduced from 2021, which will put additional strain on the global market.
The US bank is not just pointing to geopolitical considerations. “An escalation of conflict could increase refining margins due to possible disruptions to this activity in the Middle East,” estimates the new study released Thursday. Analysts point out that fuel freight rates could also rise, widening price differences between regions.
Geopolitical restrictions are putting additional strain on the refining industry, which is still reeling from the effects of the 2020 health crisis, according to the report. This means that it will not recover to pre-millennium levels until 2023. However, the North American company estimates that problems in the industry would continue into 2024, further limiting the capacity to produce gasoline and other petroleum derivatives.
The analysis also highlights the impact of cuts agreed by OPEC, which have kept refining margins high, as well as the impact of shutting the tap from Russia. The combination of both factors, the company said, could result in “refineries sacrificing efficiency rates when processing other alternative oils.”
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