WTI crude fell below $60 per barrel as easing Middle East tensions and weak China–U.S. sentiment erased much of oil’s geopolitical risk premium. Friday, October 10, 2025 The relatively successful implementation of the Israel-Gaza ceasefire deal has lowered geopolitical risk premiums in oil futures and sent front-month ICE Brent prices below $64 per barrel. The evident escalation in China-US tensions isn’t adding any bullish momentum to crude either, with all signs pointing towards a 2026 impact on g ...

"The immediate impact on the oil markets will be a slight decrease in the geopolitical risk premium—about 1%-2% of the current Brent price—as the markets figure out the details of the peace plan," said Claudio Galimberti, chief economist at Rystad Energy. "In the longer term, if the plan for stable peace proves credible, its impact on prices could be more structural and profound." Brent crude and WTI edged 0.3% higher to $62.19 and $66.43 a barrel, respectively, after opening the session lower. Oil prices w ...

Let's get to Kevin Green who joins me now. And uh we're waiting on a lot of data. Kevin, obviously we didn't get the jobless claims today. We're unlikely to get the NFP tomorrow.So I mean, what are you watching for. What should we be keeping an eye out on. You know, given the lack of visibility that we've got and you know, arguably the Fed as well.>> Well, Sam, I mean, we we continue to kind of look at our screens and just hope that some data actually does populate. Obviously, we were supposed to have facto ...

Investment Rating - The report indicates an increased geopolitical risk premium of $12 per barrel for Brent oil prices, reflecting a higher probability of supply disruptions due to escalating tensions in the Middle East [2][5][3]. Core Insights - The Brent oil price has risen to just under $80 per barrel, with expectations of potential price increases due to supply disruptions, particularly from Iran [3][2]. - The Polymarket prediction market shows a 52% chance that Iran will close the Strait of Hormuz in 2025, up from just over 30% previously [3][2]. - Two main disruption scenarios are analyzed: a reduction in Iranian oil supply and broader regional disruptions affecting oil production and shipping [9][18]. Summary by Sections Oil Price Scenarios - If Iranian oil supply drops by 1.75 million barrels per day (mb/d), Brent prices could peak around $90 per barrel [10][12]. - A scenario where oil flows through the Strait of Hormuz drop by 50% for one month could see Brent prices reach approximately $110 per barrel [15][20]. - The report anticipates that European natural gas prices (TTF) may rise closer to 74 EUR/MWh ($25/mmBtu), reflecting a higher probability of significant supply disruptions [33][34]. Geopolitical Context - The report emphasizes the importance of the Strait of Hormuz, through which nearly 20% of global oil flows transit, and the potential impact of disruptions on global energy prices [30][19]. - A hypothetical large disruption could push oil prices above $110 per barrel, given a 20% disruption to global energy supplies [30][32]. Natural Gas Market Implications - The TTF price increase since the onset of the Israel-Iran conflict suggests an 11% market-implied probability of a sizable LNG supply disruption [34][35]. - A sustained disruption in natural gas supply could lead to European prices exceeding 100 EUR/MWh [37]. US Natural Gas Market - The report notes that the impact of a global LNG supply disruption on US natural gas prices would be limited due to the US being a large net exporter of LNG [39][40].

Investment Rating - The report maintains a cautious view on the European Oils sector despite raising the Brent oil price assumption due to higher geopolitical risk premium [1][2]. Core Insights - The report highlights differentiated growth stories, resilient cash returns, and asset monetization optionality as key themes for the sector [1]. - It emphasizes the importance of strong balance sheets and value crystallization through disposals, with specific companies like Saudi Aramco, Equinor, Shell, and Galp noted for their financial strength [3][6]. - The report identifies potential divestment opportunities among EU Big Oils, particularly for Repsol, BP, and ENI, which could significantly impact their equity value [69][70]. Summary by Sections Commodity Price Outlook - Brent oil prices dipped to the low $60s/bbl but recovered to approximately $75/bbl, while EU gas prices saw a significant drop quarter-over-quarter [2][30]. - The report adjusts the Brent price assumption for 2H25 to $65/bbl and maintains a negative outlook on oil despite a higher long-term price forecast [31][39]. Financial Performance and Cash Returns - The sector is expected to see a 20% quarter-over-quarter decrease in operating cash flow (OCF) due to higher seasonal tax payments, with average gearing projected to increase modestly [3][64]. - EU Big Oils are projected to offer a total cash return to shareholders of 11.7% in 2025, combining a 5.4% dividend yield and 6.3% from buybacks [6][26]. Growth and Capital Expenditure - Companies like Galp and Shell are highlighted for their differentiated cash flow growth and capital expenditure flexibility, with Galp expected to see over 20% production growth from the Bacalhau start-up in 2025 [7][48]. - TotalEnergies is forecasted to have the strongest production growth among the Big Oils, exceeding 3% in 2025, while Repsol and Shell also show promising growth profiles [49][55]. Divestment Strategies - Major EU Big Oils are adopting diverse divestment strategies to streamline portfolios, focusing on high-return projects [69]. - BP is noted for its significant divestment pipeline, targeting $20 billion in disposals by 2027, while Repsol has already announced substantial asset rotations in renewables [73][76].

Investment Rating - The report does not explicitly provide an investment rating for the oil industry but discusses various price scenarios and geopolitical risks that could impact investment decisions [4]. Core Insights - The Brent oil price closed at $66.9 per barrel on June 10, with expectations of a decline to around $60 per barrel in Q4 if no supply disruptions occur [2][4]. - A geopolitical risk premium of approximately $10 per barrel is estimated, with potential spikes in Brent prices above $90 under lower supply scenarios from Iran [4]. - Oil exports from Iran remain uninterrupted, while a significant decline of 45% (or 3.3 million barrels per day) in oil flows through the Bab-El-Mandeb Strait is projected by 2025 compared to 2023 [4][16]. - The probability of US military action against Iran is estimated at 65% by July, while the likelihood of a US-Iran nuclear deal in 2025 stands at 50% [21][22]. - Global spare capacity is estimated to be around 4-5% of global demand, which could serve as a buffer against disruptions from Iran [4][32]. Oil Prices and Geopolitical Risks - The report highlights a close link between oil prices and the probability of US military action against Iran, indicating that market sentiment is currently leaning towards higher prices in the short term [6][19]. - The futures curve and implied volatility suggest that oil markets anticipate much higher prices in the coming months, while long-term outlooks remain stable [4][26][29]. Oil Flows and Shipping Costs - Oil flows through the Strait of Hormuz remain uninterrupted, but the report notes vulnerabilities in shipping routes due to potential attacks from Iran-controlled Houthis [4][13]. - Increased risks have led to a rise in oil shipping costs, particularly for Middle Eastern routes [4][44]. Refined Product Prices - Diesel margins in Europe have increased due to downside risks to exports from the Middle East, reflecting the impact of geopolitical tensions on refined product pricing [4][43].

Geopolitical Risk & Oil Market Impact - The market is pricing in a significant geopolitical risk premium of approximately $10-12 per barrel, representing about 15-20% of the total crude oil price [3][6] - The Strait of Hormuz is identified as a key chokepoint, and any disruption there could lead to a potentially large oil supply disruption [2][3] - While Iran's oil production isn't currently targeted, its continued flow and Saudi Arabia's potential to compensate are crucial factors [4] Oil Market Dynamics & Outlook - OPEC+ moving to return barrels is a key factor influencing market sentiment and limiting fresh long positions [4] - Many analysts previously forecasted lower prices ($40-50), but the firm's 12-month Brent forecast remains at $65, indicating a medium-to-long term bearish outlook from current prices [4] - Short-term bullish catalysts exist, but investors require a positive medium-to-long term outlook to sustain long positions [4] Oil Consumption & Economic Impact - Oil consumption as a share of GDP has decreased, particularly in the US due to its shift towards a service-based economy [6] - Despite the decline in oil intensity, the US still directly consumed approximately $650 billion worth of oil last year, highlighting the significant economic impact of price fluctuations [7] - A 10% price move in oil translates to a $60 billion impact on US oil consumption [7]

Investment Rating - The report does not explicitly provide an investment rating for the transportation sector or specific companies within it Core Insights - The Brent oil price has increased by 12% to $74/bbl due to geopolitical tensions, with a forecasted decline to $59 in Q4 2025 and $56 in 2026, assuming no disruptions in oil supply [1][7] - A potential drop in Iranian oil supply by 1.75mb/d could lead to Brent prices peaking over $90/bbl before declining back to the $60s as supply recovers [1][8] - The transportation sector, particularly tankers and airlines, may experience significant impacts from fluctuating oil prices and geopolitical risks [1][2] Tankers - Iranian oil constitutes 3% of global oil production; a reduction in this supply could shift 0.8-1.5% of global ocean tanker demand from shadow fleets to compliant fleets, potentially benefiting companies like COSCO Shipping Energy [1][21] - The report anticipates an upside in shipping rates and share prices for compliant tanker fleets due to the expected shift in demand [1] Airlines - Airlines are highly sensitive to oil price changes, with China Southern Airlines showing a 22% earnings downside per 1% increase in oil price, followed by China Eastern Airlines and Air China at 17% and 10% respectively [5][17] - Despite short-term pressures on earnings due to rising fuel costs, long-term demand for air travel is expected to remain stable, provided there are no widespread concerns over aircraft safety [5][17] - The report maintains a bearish medium-term outlook on Brent oil prices, forecasting $66 in 2025 and $56 in 2026, which could alleviate some pressure on airline earnings in the longer term [5][7]

Investment Rating - The report indicates a higher geopolitical risk premium in the near term but maintains an unchanged forecast for 2026 oil prices [5][26][29] Core Insights - Brent oil prices have increased by 12% to $74 per barrel due to escalating tensions in the Middle East, particularly Israeli strikes on Iran's nuclear program [4][5] - The forecast predicts Brent and WTI prices will decline to $59 and $55 per barrel in Q4 2025, and to $56 and $52 per barrel in 2026, assuming no disruptions to oil supply [5][29] - Two alternative scenarios are considered for potential price impacts: one involving damage to Iran's export infrastructure leading to a peak Brent price of over $90 per barrel, and another considering broader regional disruptions that could push prices above $100 per barrel [20][24] Summary by Sections Price Forecasts - The report adjusts the Brent price forecast for Q3 2025 to $63 per barrel from $61, while maintaining a long-term forecast of $56 for 2026 [5][29] - The report outlines a detailed forecast for Brent and WTI prices across various quarters, indicating a gradual decline in prices through 2026 [29] Geopolitical Risks - The report highlights the increased geopolitical risks due to recent events in the Middle East, which could lead to short-term price volatility [6][26] - It emphasizes that while the geopolitical risk premium may normalize if oil supply remains stable, the current situation has heightened uncertainty [6][26] Iranian Oil Infrastructure - The report estimates Iran's crude production at 3.6 million barrels per day (mb/d) and discusses the potential impact of damage to its oil infrastructure on global energy prices [7][16] - It notes that damage to upstream or midstream assets would have a more significant impact on prices compared to downstream assets [7][16] Scenarios for Price Upside - The first scenario considers a reduction in Iranian production by 1.75 mb/d for six months due to infrastructure damage, with a subsequent recovery [17][20] - The second scenario examines risks to regional trade routes and potential disruptions in the Strait of Hormuz, which could significantly affect global oil prices [23][24]