Oil market risk premium may rise further: Survey

Oil market analysts are reassessing the geopolitical risk premium they should place on global crude prices amid speculations on the possibility of the US joining Israel in bombing Iran.

According to a Bloomberg survey of analysts and traders, the premium to Brent crude futures has increased by about $8 a barrel since Israel and Iran began attacking each other last week.

Participants in the survey, the results of which were published Thursday, said that US intervention in the conflict would increase this premium, but the extent of the increase would depend on the nature of the intervention.

Reports earlier this morning indicated that President Donald Trump had already approved plans for an attack on Iran but postponed implementation, and that senior US officials were already preparing for a possible strike within days.

Shell CEO Wael Sawan warned that any potential shutdown of a major chokepoint in the Arabian Gulf could cause a major shock, and that the oil company has contingency plans in place.

Barclays analyst Amarpreet Singh said, "We believe the worst-case scenario has not yet been factored in. In the worst-case scenario of a wider war, we expect prices to exceed $100 per barrel."

Goldman Sachs said today that it currently estimates a risk premium of around $10 per barrel in the market, and that high global spare production capacity could mitigate any price spike.