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Crude’s Current Geopolitical Risk Premium Around $3/b

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Geopolitical tensions are adding a risk premium of around $3/b to crude prices, according to Bloomberg Intelligence, down from around $12/b in October

  • The falling risk premium suggest that markets do not expect a widening conflict, especially with ongoing discussions towards a possible ceasefire between Israel and Hamas.
  • Crude prices are up around $5/b since Oct. 7 when the Israel-Hamas war began.
  • Stronger demand factors have contributed around $18/b.
  • This is driven by upward revisions for global economic growth, US growth being revised upward by 1.5 percentage points, and IEA expectations for global oil demand also being increased.
  • Supply side factors have subtracted around $16/b from crude prices, however. Higher production from the Americas are expected to absorb the total global demand increase.
  • Meanwhile, several OPEC+ members continue to consistently overproduce, particularly Iraq and Kazakhstan.

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Geopolitical tensions are adding a risk premium of around $3/b to crude prices, according to Bloomberg Intelligence, down from around $12/b in October

  • The falling risk premium suggest that markets do not expect a widening conflict, especially with ongoing discussions towards a possible ceasefire between Israel and Hamas.
  • Crude prices are up around $5/b since Oct. 7 when the Israel-Hamas war began.
  • Stronger demand factors have contributed around $18/b.
  • This is driven by upward revisions for global economic growth, US growth being revised upward by 1.5 percentage points, and IEA expectations for global oil demand also being increased.
  • Supply side factors have subtracted around $16/b from crude prices, however. Higher production from the Americas are expected to absorb the total global demand increase.
  • Meanwhile, several OPEC+ members continue to consistently overproduce, particularly Iraq and Kazakhstan.

Keep reading...Show less