Francisco Blanch acknowledges that he has been on edge for nearly four months. The Madrid-born head of global commodities and derivatives at Bank of America has been on the front line of the energy shock triggered by the war in Iran and the closure of the Strait of Hormuz, and now that Washington and Tehran have begun negotiations toward a final peace deal, he is optimistic. He notes that the economy has weathered the blow well — “it’s in fairly good shape, despite everything that has happened” — and even believes oil demand will emerge stronger in the medium term, despite geopolitical risks, as reserve buffers and consumption adjustments have proven effective in preventing an energy collapse. Above all, he is confident that normality will return to Hormuz by the end of the year, given that both the United States and Iran need this to happen and that Trump had no appetite to take things further.
Question. What is your current forecast for oil prices this year?
Answer. We revised our forecasts at the start of the war, when we raised our estimate to an average of $92.5 per barrel of Brent crude this year. And we lowered it last week to an average of $82. Prices skyrocketed at first, but then the United States eased sanctions on Russia, and there was no attempt to cut off the flow of Iranian oil during the first weeks of the war, which eased tensions somewhat. The release of 400 million barrels from strategic reserves was also announced, and another 300 million barrels of sanctioned oil were available at sea. And of course, there has also been some reduction in demand — that’s how we’ve more or less managed to get by over the last four months.
Q. When will supply recover to the point where supply and demand are in balance?
A. Inventories are falling and will continue to fall very rapidly in the coming months, but we think we’ll likely see a balanced market by the fourth quarter. Not yet in the third quarter; supply is only just beginning to flow through the Strait. This Monday, three large Iranian tankers, each carrying two million barrels, were passing through the Strait of Hormuz bound for Asia, and demand is recovering. But it will still take some time to reach that balance, because over the summer we’ll face a massive bottleneck at various points along the Strait. All the sea mines must be cleared, and transit capacity is currently limited. We expect that 40% of traffic will likely be restored by the end of July, 75% by the end of September, and the remainder by the end of the year.
Q. Are you confident that the Strait of Hormuz will return to complete normalcy? What if the conflict resumes?
A. Our forecast is for an average of $82 this year, based on the assumption that the Strait of Hormuz will fully reopen and that in the second half of the year, prices will be closer to the $70–$80 range. There is a risk that the conflict could return, because we’re talking about 60 days of negotiations. By September, when that deadline would have expired, as many as 65 ships a day could already be passing through the Strait of Hormuz. Perhaps military tensions will continue, but we believe the most reasonable scenario is that there will be an increase in oil supply. Things will return to normal because it’s in the interest of both Iran and the United States. In the U.S., public opinion is not in favor of the conflict. I think Trump has reached his limit and stopped there. And in a way, it’s not that surprising: the scenario was never that this war would last six years, or even six months. The most reasonable assumption is that we’ll see more and more ships crossing the Strait, but probably without reaching 100% of normal levels even during a good season.
Q. Iran has shown the world that it can close the Strait of Hormuz. Will there be a risk premium on crude oil?
A. Compared to the situation at the beginning of the year, certainly. And oil inventories need to be replenished. The U.S. has its lowest strategic crude oil reserves in decades, and replenishing them won’t be a quick process; it will be an additional factor driving demand. China will also have to replenish its reserves; I don’t think this will be a factor that drives prices higher, though it will provide some support. The country was very well prepared and has managed the situation very well to avoid supply shortages: China’s inventory levels are still higher than they were before the war. It buys when oil is cheap and stops buying when it’s expensive.
Q. And when will we see a return to the pre-war oil production surplus? The International Energy Agency forecasts a significant surplus by 2027.
A. Yes, there will be a surplus in 2027; the question is how much. We think it will be close to one million barrels per day, depending on what OPEC does, on production in the United Arab Emirates, on how Iran behaves, on the extent of damage in the region, on whether we face any transit issues in the Strait of Hormuz again, and on whether China returns to the market… But in principle, there will be a surplus because we had one before the war, and a large portion of the volume that has been lost will be recovered.
Q. How do you expect OPEC and the UAE to contribute to that surplus? Will they be able to ramp up their oil production to quickly make up for what they’ve lost?
A. They will play an important role, but we also have to ask ourselves how cheap that oil supply will be. Four months ago, it was the cheapest energy in the world, but today the same cannot be said. We don’t know whether there will be a toll imposed by Iran or not; defense spending by the Gulf countries is going to increase considerably, and they will have to invest heavily in repairs and in alternative supply routes and storage facilities. The Gulf countries are going to have to focus more on their local economies.
Q. What long-term effects do you think this war might have on oil demand? Will the adoption of alternative energy sources to oil and gas accelerate?
A. It’s true that we need to reach a price level that makes oil an attractive fuel again. Global energy demand is very strong right now; the economic transformation driven by artificial intelligence requires chips and energy. Electric utilities are terrified by the demand for capacity driving investments by hyperscalers. AI and electric vehicles won’t lead to lower energy consumption — data usage is enormous. I believe that, comparatively speaking, the price of oil isn’t particularly high. Over the past four months, we’ve experienced the largest disruption in oil production in history, and absolutely nothing has happened. Some countries in Southeast Asia have had to adjust their demand, but overall there has been neither a global recession nor completely out-of-control energy prices. Quite the contrary — we’ve been able to manage the situation through reserves, adjustments, and flexibility in a truly surprising way, to the point where I believe this could be positive for demand for hydrocarbons in the medium term.
Q. Do you think the United States has emerged stronger from the war, at least as the world’s leading crude oil producer?
A. Yes, because in the end, you still need the missile defense shield in Qatar, but not off the coast of the Gulf of Mexico. The United States has not cut back on its export levels at any point over the past four months. We can’t live without U.S. oil; it produces nearly as much as used to pass through the Strait of Hormuz daily — about 21 million barrels a day, which is 20% of global production. And nearly a third of liquefied natural gas production. The U.S. needs a market with prices that allow it to produce that oil, and that’s something we have to take into account as well. If Brent crude falls back to $60 or $65 per barrel, we’ll see a repeat of what happened at the beginning of the year: U.S. production, which had been rising, will decline.
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