Oppenheimer oil analyst Fadel Gheit believes oil prices are in a bubble.
Gheit says 20-30% of the current oil price reflects a “supply risk premium” that will disappear when Iran’s nuclear issue is finally resolved.
“We believe the current oil price bubble will burst eventually and the question is not if, but when and to what level,” writes Gheit in a note to clients. “Oil prices in the $75-$85 range would help spur global economic growth, keep inflation low, boost consumer confidence, and still fund many new oil projects. Settling the nuclear issue could open Iran’s vast oil and gas resources to western oil companies, increase supplies, lower oil prices and squeeze speculation out of the picture.”