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OIL: Geopolitical Risk Coming Off Oil: Goldman

OIL
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The geopolitical risk premium in the oil market has decreased slightly this week following recent sharp increases last week in both implied Brent volatility and call options implied volatility skew according to Goldman Sachs.

  • Goldman still expects $10-20/bbl upside if Iranian oil supply was to be disrupted.
  • In the absence of major disruptions, oil could stabalise around current levels this quarter.
  • "Options markets are pricing in a roughly 5% probability of a $20/bbl price jump, which we estimate roughly corresponds to a 2 million barrels per day6-month interruption without an OPEC offset, occurring within the next month," the bank said last week. 
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The geopolitical risk premium in the oil market has decreased slightly this week following recent sharp increases last week in both implied Brent volatility and call options implied volatility skew according to Goldman Sachs.

  • Goldman still expects $10-20/bbl upside if Iranian oil supply was to be disrupted.
  • In the absence of major disruptions, oil could stabalise around current levels this quarter.
  • "Options markets are pricing in a roughly 5% probability of a $20/bbl price jump, which we estimate roughly corresponds to a 2 million barrels per day6-month interruption without an OPEC offset, occurring within the next month," the bank said last week.