Macquarie Calls Geopolitical Risk Premium in Oil "About Right"

Macquarie believes the geopolitical risk premium built into oil at present is “small right now, probably $2-3/bbl” according to Vikas Dwivedi, global energy strategist at the bank in an interview with CNBC this week.

• “It is probably about right but if there is a lean on it then it probably should be a little higher” Dwivedi said.
• “The market has got used to the idea that it can have risk, troubles and even wars and you may still not lose barrels of oil” he added.
• He referred to the current premium as more related to “frictional costs” such as higher freight rates and fuel costs rather than related to barrel losses.
• “For the first time in quite a while, we have quite a positive skew on oil demand” he said.
• “China did ok last year but didn’t meet the expectations of the market.” “This year, we think demand will be more evenly distributed [between various parts of the world]”