Why the Brent crude oil price may rise to $147 a barrel.
During this talk, I refer to a model of the Brent Oil Price published every month by the EIA: the US Energy Information Administration, which is part of the US government.
Now, my conclusions from the model are very different from their own conclusions in their monthly report, because I am making different assumptions about the value of inputs into the model.
I also reference monthly data drawn from the IEA, the International Energy Agency.
The Iran war is not about oil . It has had a major effect on the price of oil and the future availability of oil ,but it is not about oil.
On the 13th of March, in a video I produced titled Trump’s 11 nuclear reasons for the Iran war, I reported on negotiations between the US team, including Steve Witkoff and Jared Kushner and Iran . During those discussions, the Iranians revealed they had 10,000 kilograms of fissionable material. Of this, 460 kilograms were enriched to 60%, and 1,000 kilograms were enriched to 20%.
It was stated that the 60% enriched uranium could reach weapons-grade purity of 90% within 7 to 10 days, while the 20% enriched uranium could reach weapons-grade within 3 to 4 weeks. Combined, this material would be sufficient to produce approximately 11 nuclear bombs.
The objective of the war is to force Iran to surrender this enriched material. This has led to conflict and the closure of the Strait of Hormuz, which in turn has caused a shortage of oil and driven higher Brent crude prices.
This brings us to the key question: what happens next for oil prices?
Importantly, at a recent meeting in Beijing, President Xi and President Trump agreed that Iran should not possess nuclear weapons. This implies that the US will continue to pressure Iran to surrender its enriched uranium, while China is unlikely to oppose the US stance and may even support it.
This brings us to the key question: what happens next for oil prices?
To answer this question we construct a probability matrix ,similar in concept to modelling a horse race
Using data from US betting markets, we estimate the time when Iran may surrender its enriched uranium. From this, we construct a probability matrix, to assessing the likelihood of different timing scenarios.
Based on these probabilities, we model the outlook for Brent crude using a framework derived from the EIA model, but with our own assumptions rather than theirs.
This modelling suggests to us that the most likely timeframe for Iran to surrender its enriched uranium is around September 2026. In that scenario , Brent crude oil prices are expected to continue rising and could peak at approximately $147 per barrel in September.
From that point in September , prices should begin a gradual decline. This will be a slow decline because of the low level of global oil inventories as demand recovers.
Looking at the International Energy Agency’s May data, the ratio of global oil demand to supply shows that while there was excess supply at the end of last year, the situation has now shifted. Demand is now exceeding supply and is expected to remain elevated through to the end of 2026.
This imbalance supports higher prices in the near term and explains why any eventual decline in oil prices is likely to be slow rather than sharp.
The EIA model as published assumes the war may resolve within a few weeks, leading to a quick drop in prices. Our assumption is different. We believe the conflict will continue until Iran surrenders its nuclear material, which is most likely around September.
Under this scenario, oil prices would continue rising until that point, reaching around $147 per barrel. Once peace breaks out we should the see the beginning of a gradual decline in the oil price .
In commodity markets we often say, that “what goes up must come down”. However, in this case, we expect that once oil prices peak, the downward movement will be slow rather than swift.
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DISCLAIMER: Information is of a general nature only. Before making any financial decisions, you should consult with an experienced professional to obtain advice specific to your circumstances.
