Add Bank of America's commodities and derivatives research chief to the growing list of Wall Street strategists who see Brent crude sticking around $90 a barrel this year, as any near-term resolution to the Hormuz chokepoint crisis appears increasingly distant. The call follows Goldman's move several weeks ago to raise its year-end oil outlook to around $90.
BofA analyst Francisco Blanch joined Bloomberg Television's Surveillance earlier and warned, "We have a pretty large deficit that is running 14 million to 15 million barrels a day short, or 14% to 15% short of what we need to see for prices to stabilize and go down to $60 or $70 a barrel."
As of late Monday afternoon, Brent crude futures were trading above $112 as the reality of the weeks-long stalemate returned, indicating that the Trump team is not open to any concessions to Tehran.
Blanch's new outlook hinges on continued Hormuz disruption into next month. He noted that restoring tanker flows through the critical waterway is the optimal outcome but warned that the double blockade would lead to a gradual grind higher in prices, to $120 or $130 a barrel by the end of June or early July.
In the final days of April, Goldman analysts raised their fourth-quarter oil price outlook to $90 for Brent and $83 for West Texas Intermediate.
The chart below summarizes why their crude outlook for the fourth quarter is nearly $30 higher than it was before the Hormuz shock:
Frederic Lasserre, head of research at Gunvor, one of the world's largest oil traders, warned last week that "the tipping point is clearly June. This is the point at which something has to give."
JPMorgan analysts recently warned that the world is spiraling toward a catastrophic cliff-edge shortage of crude oil if the maritime chokepoint remains blocked for another 4 weeks.
Furthermore, Maersk CEO Vincent Clerc warned that a prolonged Hormuz closure is a "new wake-up call" that could seriously dent global trade.
For more context, former CIA operative and RBC commodities head Helima Croft told clients just days ago that she is "very skeptical of a June grand reopening or even that maritime traffic will return to February 27 levels for the foreseeable future."
All of this suggests that, with the latest AAA data showing the U.S. national average for unleaded 87 gasoline at $4.55 per gallon, higher prices could certainly arrive ahead of Memorial Day's driving season and may soon push prices toward the demand-destruction line of $5, unless a resolution to the U.S.-Iran conflict comes very soon.