Traders are bidding up crude by as much as 15 percent on the assumption that conflict with Iran will lead to the biggest disruption to the Persian Gulf oil supplies since 1991, according to Societe Generale SA, which says prices may jump to $200 should cargoes be interrupted. 

 

Brent, the benchmark grade for more than half the world’s oil, is trading for $5 to $15 a barrel more than it would without the standoff with Iran.

 

UBS AG, Switzerland’s biggest bank, says the risk of a confrontation that would shut off shipments through the Persian Gulf has added about $10 to the price of crude.

 

“Oil’s recent rally is overextended,” said Olivier Jakob, managing director at Petromatrix GmbH, a Zug, Switzerland-based consultant that counts Total SA and Gunvor Group Ltd. among its clients. “The premium is at least $15, amid talk of Iran being proactive with an oil embargo” and a possible Israeli attack, Jakob, who recommends buying options that give traders the right to sell Brent, said in a Feb. 9 interview.

 

Brent has gained 14 percent since Dec. 14. The European Union last month announced a ban on Iran’s oil imports by July 1.

 

Iran has cut exports to six EU countries and summoned the envoys of Portugal, the Netherlands, Italy, Spain, France and Greece for talks in Tehran, state-run Press TV reported.

   

A closure of the Strait of Hormuz would be the biggest disruption to Persian Gulf crude exports since 1990, an event that all but shut off about 5 million barrels a day of supplies.  

 

“Oil would spike dramatically if you cut off Hormuz, so you’re looking at $100-plus on top of the price,” said Francisco Blanch, New York-based head of commodities research for Bank of America. 

(Source: Bloomberg)