Bank of America says it is within the realm of possibility for oil to climb to a staggering price of $200 a barrel if the Strait of Hormuz remains a hostile place for a long period of time.
In a new Bloomberg interview, Francisco Blanch, head of commodities and derivatives at Bank of America Securities, says the Strait of Hormuz is a critical area for vessels because there’s no alternative for the roughly 20 million barrels of oil passing through the Persian Gulf daily.
According to Blanch, oil shippers will not risk passing through the strait after seeing the attacks on 20 vessels.
“So it’s a difficult time for shippers, for insurers. Everyone is waiting for a resolution. But if it doesn’t come up in the next few weeks — I’m going to give it maybe until the end of the month — things can get very, very complicated for oil prices.”
The Bank of America executive warns that the prolonged closure of the Strait of Hormuz is bad news for the economy.
“But again, we need to see this war come to an end because if we don’t, I think the risks of recession will grow by the week as we head into April.”
He also says that if conditions stay the same in the next few months, oil could shatter $200.
“And definitely, if we are still in the same place in May, looking into the third quarter, I’ve already mentioned, we could see spikes to $160 a barrel. If things keep going, we could see Brent breaking $200 a barrel. It may take a little longer to get there, but it’s important to understand that we don’t have that much time.
The US is a little more insulated than other regions, but Europe is very, very exposed, as are many Asian countries, particularly Northeast Asia.”
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