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Iran unlikely to disrupt Strait of Hormuz: Deutsche Bank

Thursday, 23 February 2012 | 11:00
The world faces oil supply risks from a multitude of sources, not only in the Middle East but also in Africa. Not since the late 1970s/early 1980s has there been such a serious threat to oil supply. These risks have been brought into closer focus because of the Iranian threat to close the Strait of Hormuz.
A potential Iranian disruption of shipping in the Strait as a low probability given the highly damaging impact it would have on Iran itself. However, the mere utterance of such a threat is a grave concern for the oil market given the strategic importance of the Strait on a global scale. The threat perhaps more broadly serves as a tangible reminder of geopolitical risks that will feature prominently this year, with the Middle East at the epicentre.
OPEC spare capacity is sufficient to offset the loss of Iranian exports or a combination of smaller losses, but not the totality of the potential disruptions, though we acknowledge that such a scenario should be given a low probability. As in the Libyan production drop in early 2011, however, the quality of crude oil lost could play a strong role in the ability of OPEC spare capacity to completely ameliorate the disruptions.
Meanwhile, the IEA has lowered its 2012 global oil demand forecast by 300,000 bpd bringing its latest projection to growth of 800,000 bpd or 0.9%. The catalyst for the revision centered on the IMF’s downward revision of global GDP to 3.3% from the prior forecast of 4% growth. Only if world growth falls to 2.5% would we view demand side fundamentals in the oil market as turning bearish.
Source: Deutsche Bank
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