Esty Dwek (Natixis): no sustained spike in oil prices expected

- The initial spike in prices is not a surprise following the drone strike, as it impacted about 5% of global supply. The question is how long it takes for the supply to get back online. Initial estimates were slow but it turns out it could be a few days only.

- However, the risk premium of geopolitical risk, which has been basically ignored by markets in favor of growth worries in recent months, is likely to be priced in going forward. So while we’ve already seen a retreat in prices, they will probably not come all the way back down, pricing in for some risk of further geopolitical tensions or disruptions.

- One thing to keep in mind is that Saudi (and most oil exporters) would be happy with higher oil prices (to balance their budgets). Indeed, they have tried and failed to achieve them. At the same time, the US (and Trump especially) doesn’t as it would be a tax on the consumer, the solid pillar of the US economy. The timing isn’t ideal for Trump so we expect to see more US comments or output to ease supply constraint fears.

- Overall, some more headlines and a higher price than in recent months is to be expected, pricing in more risk of such events. He recent rebound in risk appetite and easing global trade tensions might support a slightly higher price as well. However, we do not expect a sustained spike, and believe that shale production will continue to balance medium-term prices.