Bernstein: Brent Crude Oil's Fair Price Should Be at $120

Bernstein's latest research report points out that the current actual trading price of Brent crude oil is around $107 per barrel, but considering the level of international tension, the reasonable theoretical central value for oil prices should be around $120 per barrel. The institution emphasizes that, despite the market's urgent general expectation for the oil market to quickly return to normality, this return process will be noticeably slower than the mainstream consensus expectations on Wall Street.

By deeply comparing major historical crude oil supply shock events over the past 40 years, Bernstein reveals the core details of the durability of oil price trends. After crises such as the 1990 Kuwait crisis and the 2022 Russia-Ukraine conflict, international oil prices often take 30 to 50 days to reach the peak of fluctuation. Even more critically, even after the media coverage热度 has peaked and fallen, the oil prices may fluctuate at high levels and eventually fall back to pre-conflict levels, often requiring an additional two to three months.

This suggests that for global asset allocators, the common sense of traditional oil prices quickly normalized is failing. Bernstein admits that although the gradual process of international oil prices moving closer to a rational central value may not lead to an explosive revaluation in crude oil stocks in the short term. However, this long-term high and highly sticky oil price environment will create an extremely strong and continuous real cash flow for upstream oil and gas exploration and production companies such as Pioneer Energy, Devon Energy, and ExxonMobil, thus significantly raising the long-term inherent investment value of related energy companies.

Looking forward, Bernstein advises investors to focus on the actual supply red lines faced by key oil passageways such as the Strait of Hormuz. Compared to the global supply interruption of 4.3 million barrels per day during the 1990 Kuwait crisis, the geopolitical potential for disruption at just the Strait of Hormuz today is as high as 20 million barrels per day. At a new depth and scale where global crude oil daily demand has broken through the 66 million barrels of 1990 to today's 103 million barrels, the solid supply discipline of the Organization of the Petroleum Exporting Countries and its allies will become a solid resistance supporting the long-term high fluctuation of oil prices.