Improving oil demand is driving prices more than any cutback in supply from Iran, according to Jeff Currie, Goldman Sachs' head of commodities research.
While the environment may feel the same as this time last year, when revolution in Libya knocked out oil production, there is no supply disruption with Iran, he said.
Sanctions against Iran have cut off its export market in Europe, but its crude still flows into Asian markets.
Currie said at the same time Saudi Arabia has stepped up to add to global supply and Libyan oil is coming back to market.
Another difference is that when Libya was a concern last year, investors were snapping up call options. This year, there is a negative call skew.
"That's telling you people aren't buying oil because they think there's a supply disruption," he said.
Currie said his target for Brent this year is $120 per barrel and $127.50 by year end. Brent was trading lower Tuesday, at about $122 per barrel.
Marco Alvera, managing director of Eni Trading and Shipping, was on the same panel and he said there's about a $25 premium from geopolitical risk in the price of Brent now, lifting it well above the $80 to $90 per barrel marginal cost. Brent is the benchmark for international crude, compared to the U.S. West Texas Intermediate, which is cheaper.
"Libya has been a useful test for what happened when the world loses 1.5 million barrels per day—not much," he said.
Alvera said the speculative long position in oil is huge and when an "adjustment does come or people choose to take profits, it may be wild," he said.
Earlier today, President Obama said he asked Attorney General Eric Holder to reactivate a year old task force to look into speculative activity in oil markets.
As of the latest CFTC data Friday, there was a record number of speculative shorts in gasoline futures.
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