Oil prices are being driven higher by geopolitical events, James Davis, FGE’s Director of Short-Term Global Oil Service and Head of Upstream Oil, told Rigzone. “You can say there is some ‘risk premium’ as a result, but it would be more accurate to say part of this ‘risk premium’ is due to ‘trade friction’ as shippers avoid the Red Sea,” Davis added. Carole Nakhle, the CEO of consultancy Crystol Energy, if there is a geopolitical risk premium in the oil price right now, Nakhle said, “we all know that geopolitics affect oil markets but no one knows how to quantify the risk premium which depends on one’s own perception of the risk to supply disruptions”. “Today, we haven’t seen supply disruptions. Demand is not booming. Non-OPEC+ supply is healthy, so is the spare capacity largely thanks to OPEC+ cuts,” Nakhle went on to state. Macquarie strategists said, “a combination of factors have driven the recent oil rally”. “The key factors include an increase in Middle East and Russia related risk premiums, and an unusually large number of global production outages,” the strategists added in that report. Macquarie strategists noted that,
“without current geopolitical tensions, we believe crude would sell off meaningfully”.