Expect oil prices to continue to rise, energy expert Daniel Yergin says, since problems in the Middle East aren’t fully accounted for in the oil markets.
Sanctions against Iran won’t take effect until summer and, while anticipated, their effects are not yet baked into oil prices, Yergin told CNBC in an interview. Sanctions are set to take effect on July 1.
“The sanctions won’t be in a vacuum because it will come along with increased tensions with Iran over its nuclear program,” said Yergin, chairman of Cambridge Energy Associates. “So I think what’s in the price now is only part-way there.”
Gasoline prices now average close to $3.84 a gallon, according to AAA, and some parts of the country are above $4 a gallon. Brent crude is at $126 a barrel, while West Texas Intermediate (WTI) trades at $107.
An improving U.S. economy also will put pressure on oil prices, as well as increased driving by Americans who feel they have enough money to take driving vacations but not necessarily enough to fly.
Bank of America Merrill Lynch analysts have raised their forecast for oil in 2012 and 2013 as global economic conditions improve, raising demand as supply remains constrained.
The bank now sees Brent at $118 and WTI at $106 in 2012.
“While demand has failed to contract sharply, supply has fallen short of expected increases,” wrote analyst Francisco Blanch in a research note.
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