Crude Might Drop 10% If Iran Oil Returns to Market, Blanch Says

Crude prices will probably drop, perhaps as much as 10 percent, if Iranian oil is reintroduced to the world market, Francisco Blanch, head of global commodities and derivatives research for Bank of America Merrill Lynch, said at the Bloomberg Oil & Gas Conference.

“WTI will fall below $100, maybe to the high $90s, and Brent will be at about $105,” he said at the meeting today in Houston. “We’ve seen that a lot of economies out there cannot take spikes in prices from where things are now. Oil prices will stay in this range, and maybe drop off 10 percent if Iranian crude comes back.”

Blanch spoke at the session along with Jason Bordoff, director of the Center on Global Energy Policy at Columbia University, and Barry Smitherman, chairman of the Texas Railroad Commission.

Brent crude might be as high as $150 a barrel now if the U.S. shale boom hadn’t increased oil production as output from Libya declined and Iranian oil was blocked by an import ban, Blanch said. Brent settled at $110.86 a barrel yesterday. WTI closed at $102.29.

“We lost Libya and Iran, and we gained Texas,” Smitherman joked. The Eagle Ford formation in southern Texas has boosted production from next to nothing six years ago to more than 600,000 barrels a day, he said. Production has also been increasing in the Permian Basin in western Texas, the largest onshore oil field in the U.S.

“The Permian is like the Energizer Bunny,” Smitherman said. “It just keeps going and going and going.”

U.S. natural gas prices probably won’t rise more than 10 percent because of liquefied natural gas exports, Bordoff said. November gas futures were $3.769 per million British thermal units yesterday.

“There will be modest upward pressure on prices in the U.S., just like there is for agricultural goods or anything else we export,” Bordoff said.

To contact the reporters on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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