(AOF) – The geopolitical risk premium embedded in crude oil markets, which has been relatively low most of the time this year, has increased to give rise to a variation of 5 to 10 dollars per barrel in crude oil prices, against 3 to 5 dollars per barrel, says Fitch Ratings. The latter explains this increase by the increased risk of a wider conflict in the Middle East which could disrupt oil supplies from countries such as Iran.
This situation favored a recovery in reference prices, which rose from 70 dollars to 78-80 dollars per barrel. “However, these prices are still below the average levels of the second and third quarters of last year, as the fundamental supply and demand situation remains relatively weak,” notes the rating agency. The global oil market has a structural surplus which she believes should be the dominant factor in oil markets, regardless of the risk premium.
Its current baseline oil price assumption is that Brent will average $70 per barrel in 2025, largely to reflect the market downside risk posed by supply and demand fundamentals.
