Citi analysts raised their Brent oil estimate to $105 and $100 for 2011 and 2012 respectively, from $90/barrel, on Monday.
That’s as Brent crude sits tight around the $115 per barrel mark, with WTI not far behind at $105 per barrel.
More interestingly though, Citi’s analysts sum up the four big “known unknowns” when it comes to oil and the Middle East crisis thus:
- How much supply is at risk? — In our note Global Oil & Gas – Navigating the MENA Region, 28 February, we categorised 3.3Mbd of MENA exports as vulnerable but don’t completely discount the risk of more significant volumes being affected (see page 3).
– What is the market’s ability to respond to capacity outage? — Spare capacity is concentrated in a few hands within OPEC and its supply relies on Saudi Arabia’s ability to respond effectively (see page 4).
– What is the impact on global oil demand? — Energy intensity per unit of GDP is lower than at any time in history, arguing that each unit of demand is therefore less price sensitive and at least as difficult to ration out as it was in 2008 (page 6).
– What impact does MENA change have on the long-term oil outlook? — Geological attractiveness and nations’ dependence on oil revenue does not change with government, arguing that medium-term productive capacity is most probably undeterred. We are not changing long-term oil price assumptions but consider sensitivity to change in risk profile (page 8).
While these are all very valid points, of course, we would add that among the biggest known unknowns is also the extent to which tensions will spill through to Saudi Arabia, and to what degree the authoritarian backlash sweeping the region will spread beyond the Middle East.
Meanwhile, just to sum up the tensions as they stand, here’s a handy chart guide to what’s going on in the Middle East right now:
Related links:
Oil facilities on fire - FT Alphaville
Bahrain’s strategic importance, graph du jour – FT Alphaville
Why you really can’t swap Libyan crude for Saudi – FT Alphaville
Life in the Gaddafi oil market - FT Alphaville
Oil shock 2.0, or, the benchmark wars – FT Alphaville