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HSBC flags 'risk' of $100/b oil price spike as bank revises forecast

London — HSBC has warned a lack of spare oil capacity could push Brent crude to $100/b as the bank raised its price forecasts for the benchmark through to 2020.

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Europe's largest bank is the latest global institution to revise its oil price assumptions as concerns grow over how Iranian crude will be replaced by the market once US sanctions come fully back into force in November.

"While we aren't explicitly forecasting Brent to rise to $100/b we see real risks of this happening," said the bank in a research note published on Tuesday. "The fact that much higher supply is already needed from the likes of Saudi Arabia - and the low levels of spare capacity remaining - leave the global system highly vulnerable to any further significant outage."

The bank has raised its long-term Brent forecast for the first time in 15 months to $80/b for 2019, up from its previous estimate of $70/b. The introduction of tighter standards for shipping fuel from IMO 2020 is among the bank's major concerns to cause market disruption as is the loss of Iran's crude.

OPEC's latest survey published on Wednesday showed Iranian output already falling, down to 3.60 million b/d in August, its lowest production in more than two years. Meanwhile, Saudi Arabia pumped almost 10.5 million b/d in the same period.

"There are clear signs of falling exports and builds in Iranian inventories. We would expect to see much more tangible signs of falling exports ahead of the November cut-off," warned HSBC.

The lender's revised outlook for crude coincides with a similar move by the US Energy Information Administration, which also raised its price outlook on Tuesday. The EIA expects Brent crude to average $73.68/b in 2019.

According to S&P Global Platts Analytics, oil markets are looking tight in the fourth quarter, with political risk to crude supply remaining high due to concerns over Venezuelan production declines and the potential for disruption in Iraq and Libya. Platts Analytics also expects the market could lose 1.4 million b/d of Iranian oil by November, compared to a loss of around 1.2 million b/d seen by HSBC.

"The prospect of $100/b crude prices is an emotive one, but we think it is far from out of the question," said HSBC in its research note.

Brent crude was trading above $79/b on Wednesday in London amid concerns over Hurricane Florence making landfall in the US and causing disruptions on Thursday.

--Andy Critchlow, andrew.critchlow@spglobal.com

--Edited by Maurice Geller, maurice.geller@spglobal.com