BofA: Here Are 4 Ways A Greek Exit From The Euro Could Shock Oil Prices

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Photo: hooktothejaw via flickr

We recently covered GasBuddy.com’s Patrick DeHaan’s take on what effect a Greece exit from the Eurozone would have on oil prices.Last week, Bank of America Merrill Lynch’s Francisco Blanch went one step further, laying out the effect of four Euro-crisis resolution scenarios, ranging from mild to burn-your-mouth, on oil prices:

  • Scenario 1 Greek package renegotiation: “Greece accepts modest revisions to the austerity programme (including relaxation of debt/GDP targets) and stays in EUR in return for more proactive growth stimulus from the Eurozone.”

Impact: $120/bbl Brent & $110/bbl WTI

  • Scenario 2 Face-off with Greece where exit is explored but does not materialise: “Non-pro European government will materialise after elections which will drive Greece to the brink of disorderly bankruptcy as the government attempts to broker a new funding deal which is better for Greece but untenable  for the IMF/EU/ECB.”

Impact: $100/bbl Brent & $80/bbl WTI.

  • Scenario 3 Disorderly Greek Euro exit, but other members remain in Euro: “Disorderly Greek default and exit of Eurozone as current funding run out between June and July (on our economists’ estimate). Some contagion to the Eurozone through the European banking sector, however, other Eurozone members remain in the Euro.”

Impact: $80/bbl Brent & $65/bbl WTI.

  • Scenario 4 Disorderly broad Eurozone break-up: “Greek exit leads to vast contagion and bank funding freezes in the Eurozone and results in other countries leaving and the eventual break-up of the Eurozone into a number of new domestic currencies.”

Impact: $60/bbl Brent and $50/bbl WTI for two years.

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