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Oil prices: Can Mideast tensions push them to triple digits?

Oil prices (BZ=F, CL=F) have slid down about 3% this week as some of the tension in the Middle East has eased after escalations as Iran targeted Israeli military bases. Oil production seems to remain continuous as none of the recent attacks have touched production facilities. Will this decrease last or could prices go back up to all-time highs?

Path Trading Partners Co-Founder Bob Iaccino joins Yahoo Finance to discuss the potential for oil prices to spike and what would bring about those price increases, including recent geopolitical tensions.

Iaccino affirms: "You're talking about geopolitics to get $200 a barrel. That's what gets these surprise shocks and sustainable shocks, depending on the assessed damage... We're talking about a military strike that disrupts supply. Then that would get us somewhere near that one hundred dollars and possibly exceeding its, depending on what that disruption would be..."

For more expert insight and the latest market action, click here to watch this full episode.


This post was written by Nicholas Jacobino

Video transcript


SEANA SMITH: Oil prices continue to slip this week down about 3% as fears over tensions in the Middle East perhaps starting to ease coming off of four days of losses when it comes to WTI. Joining us now to discuss what's going on with that bifurcation there is Bob Iaccino. He's Path Trading Partners Co-Founder and Chief Market Strategist. Bob, thanks so much for being here. Explain this to me, right?

Because we went into the week thinking that the geopolitical tensions that we've seen starting to bubble over, that was bullish. That was supposed to be bullish for oil. And now we're seeing four days of losses.

BOB IACCINO: Well, it was short-term, right? I mean, when you're looking at geopolitical tensions, you're looking at the ultimate thing being the supply disruption. And that didn't happen. When you had these sort of massive attack from Iran into Israel that didn't turn out to be massive at the landing point, that kind of tempered the view that Israel was going to reciprocate or, I should say, respond in a way that would disrupt the supply.

Iran is not a small producer. Despite the sanctions, oil is fungible. Oil goes one place, and then that place doesn't want the demand from another place. So you're talking about a country that produces between 2.8 million barrels and 3.1 per day. And that's not small. So when you consider that that could have been disrupted, the early move that we saw, the early trade from the speculators looking at that being a driver of crude oil was a big deal didn't materialize, still could.

But when you're talking about the supply and demand dynamics that are going on longer term, this may turn out to be a pretty good buying opportunity technically if you get below 7950 in WTI, the June WTI futures, for example, and that sustains, then you worry about lower price levels. But outside of that, this is likely a buying opportunity because bigger picture, demand is likely to exceed supply in the medium term.

SEANA SMITH: Bob, when you talk about that move higher that we could see how are you talking? Triple-digit oil? What's going to bring that conversation? $100 a barrel. What would bring that conversation. The extremely bullish view that we had seen back into play.

BOB IACCINO: Well, Seana, you're talking about geopolitics to get to $100 a barrel. That's what gets these surprise shocks and sustainable shocks, depending on the assessed damage if there were to be a geopolitical-- I call it geopolitical. We're, obviously, talking about a military strike that disrupts supply.

Then that would get us somewhere near that $100 and possibly exceeding it, depending on what that disruption would be. So it could be dominoes, right? It could be an attack that disrupts supply, and then a closing of the Strait of Hormuz, because you saw during the pandemic and the supply disruptions with the supply chain that we had as sort of a general economic factor. How to hurt the West. And Iran knows that.

If they wanted to hurt the West, that's the way they would do it. Is they would continue to disrupt supply, even after a strike. So that's what would take us there. I'm talking about just a general supply and demand imbalance, that's developing. We're about to go into the strongest seasonal tailwind for crude oil that we're going to get. It gets a flat level in the end of April and then it starts to spike in May through, say, late July, early August. That's a seasonal tailwind.

We're going to have US production tail off. And then higher interest rates slows the transition away from fossil fuels. So that's another demand fossil fuel projects need or-- I should say, like, but really need lower interest rates. So if rates are going to be higher for longer up to 10 year and further out, is going to continue to rise as some people having it moving up to 5%, that's going to disrupt supply slowly.