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Rapidan Group sees oil price up by $175/bbl if Iran attacked

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Oil prices could spike by as much as $175/bbl according to a new analysis of the impact on oil markets of an Israeli attack on Iran and subsequent closure of the Strait of Hormuz.
“Concern is rising among officials in Washington and Jerusalem that Israeli leaders increasingly favor unilateral military action to slow Iran's pursuit of a nuclear weapon,” said Robert McNally, head of the Washington, DC-based Rapidan Group.
Israeli leaders have said they favor a diplomatic solution, but a spate of Israeli media reports on a possible strike have appeared this week, accompanied by veiled threats from top politicians.
In a speech to parliament this week, Israel’s Prime Minister Benjamin Netanyahu said a nuclear-armed Iran would pose a "dire threat" to the world and "a grave, direct threat on us, too."
Meanwhile, according to McNally, press in Jerusalem and Washington is starting to get wind of the possibility of an attack, and “reports may filter into the broader market consciousness, which remains complacent.”
In an effort to determine the impact of such an attack on oil markets, Rapidan asked market participants what price response they would anticipate, taking into account current supply, demand, and stocks fundamentals.
According to McNally, a White House oil advisor in 2001-03, the new survey points to a price reaction somewhat stronger than a similar one undertaken last in December reflecting “tighter fundamentals” since then.
According to the survey’s results, oil prices would rise on average by 23% in the first hours of the attack. However, some market participants anticipate a spike of close to $45/bbl.
Rapidan Group asked market participants about their price view 30 days after the attack, taking into consideration the magnitude of the supply disruption and the response of the International Energy Agency.
Participants said prices would increase by $11/bbl under Rapidan’s short disruption scenario: Change in crude prices relative to prestrike levels after 30 days, assuming a short disruption only in Iran’s oil exports lasting just a few days without any other interruption in supply.
Participants said prices could rise by $61/bbl under the prolonged disruption scenario where IEA stocks are used. The scenario includes price change 30 days after an Israeli strike, and assumes a 21-day disruption of oil traffic through the Strait of Hormuz before returning to normal throughput of 15.5 million b/d. IEA countries offset half the loss with around 8 million b/d.
Participants said prices could rise by $175/bbl under Rapidan’s prolonged disruption scenario, where no IEA stocks are used. The scenario looks at price change 30 days after an Israeli strike, and it assumes a 21-day disruption of the Strait of Hormuz before returning to normal throughput of 15.5 million b/d.
The chance of an Israeli attack on Iran could be increased following a report by the International Atomic Energy Agency due next week, especially if it confirms that Tehran is working to develop a nuclear weapon as Western powers believe.
Oil Gas Journal

3 Comments on "Rapidan Group sees oil price up by $175/bbl if Iran attacked"

  1. armageddon51 on Sat, 5th Nov 2011 12:48 pm 

    Even Israel is not stupid enough to launch such an attack as it will set ablaze the entire middle east and destroy what’s left of the world economy. Iran has strong retaliatory options and allies. It is not in anyone interest including Israel.

  2. zoltan on Sat, 5th Nov 2011 2:06 pm 

    I have to disagree with armageddon 51. Isreal does not seem to care about the world, just as most other countries do not. They have their own narrow interests, one of which is complete military dominace in the region, which allows them to do what they want. Being the only nuclear power in the ME is one of their main concerns. They already have the most sophysticated conventional arsenal, courtesy of $3.5 bill in annual suport from the US.

  3. Dragon on Sat, 5th Nov 2011 2:47 pm 

    one must remember that all countries, regions,cities, towns, mud holes, all of thewm are controlled by the same people, i just read a comment saying that Israel wouldnt attack becuase it would destroy the middle east and the wolds economy, my point is as far as im aware thats the idea is it not, crash all markets, kill all currency then bring in the 1 world government/currency. what a better way to do it than get the middle east to kill them selves off and crash the economy while theyr are at it to blame everything on somebody else, once again. then the elite will step in with the savior master plan they have locked away.

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