As of 11:30 a.m. ET, the price of WTI crude is up 1.34% to $69.41 and Brent crude is up 0.97% to $73.92, but one analyst sees the price of oil reaching $90 by year’s end, particularly when the United States is ready to follow through on heavy sanctions for Iranian crude buyers who do not trim their purchases to zero.
These potential supply disruptions have placed upward pressure on the price of oil in addition to the U.S. initiating its first round of nuclear sanctions against Iran today–a move that confirms the United States’ intentions to interrupt the Iranian economy in order to reach a more favorable nuclear deal. Furthermore, the notion that China can simply purchase more oil to make up for the reduction in Iranian oil purchases was rebuffed.
“As we go more towards (the fourth quarter) … that’s when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose,” said Amrita Sen, chief oil analyst at Energy Aspects. “A lot of people think China can just buy all of the Iranian oil but they came out and said: ‘Yes, we may not reduce but we are not going to increase our intake either.’ So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices.”
Oil ETFs To Watch
As the price of oil continues its upward momentum, oil and gas ETFs are benefitting from the rise, such as United States Oil (NYSEArca: USO), which is up 1.47% today and 25.40% for the year. For investors willing to accept the risk of 300% leverage, the Direxion Dly S&P Oil&Gs Ex&Prd Bl 3X ETF (NYSEArca: GUSH) is up 2.78% today and 33.81% YTD.