Crude Heading for $85 by July, Says IHS Markit's Yergin

The growing consensus that the current crude price rally is only the beginning and prices could escalate even further was supported by a respected member of the analytical community when Pulitzer Prize-winning author and energy expert Dan Yergin told CNBC that crude could climb all the way to $85 by July.

In the wake of Brent nearing $80 per barrel this week, Yergin, who is also vice chairman of IHS Markit, said falling output in Venezuela, coupled with renewed U.S. sanctions on Iranian crude exports, as well as wars in Yemen and Syria that involve major oil-producing nations, would be the drivers of the price escalation.

He expressed particular concern over Venezuela, saying "the screws are really tightening" on the Bolivian republic and noting that output has fallen from almost 2.5 million barrels per day (bpd) a couple of years ago to 1.4 million bpd today and could drop to 800,000 bpd by next year,

He added, "We could see oil prices in July when demand is high ... several dollars higher than it is; we could see it as high as $85 at least for a short period of time."

Rounding out the gloomy outlook, Yergin went on to state that although U.S. drillers could easily pump more  and Saudi Arabia could increase capacity to meet demand - but he worried that Texas drillers are facing bottlenecks and was unsure if the Saudis are willing to do anything but maintain production cuts (they have repeatedly stated they want to maximize the value of their IPO of state-owned Saudi Aramco).

Yergin's idea that the Venezuelan and Iranian situations could cause a severe market tightening is shared by the International Energy Agency, which in its latest monthly report released Wednesday stated that "The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality."

Neil Atkinson, head of the oil industry and markets division at the IEA, told CNBC that "If there is a large shortfall in Iranian exports, then clearly that will have an impact on a market that is already quite tight.

"And it's not beyond the realms of possibility that by the end of 2018, production in Venezuela could be several hundred thousand barrels lower than in its today; if that shortfall there coincides with a large shortfall in Iranian exports as the sanctions are implemented, that potentially poses a challenge."

As for how by how much Iranian oil could be curtailed, Atkinson said, "We'll just have to see how the U.S. implementation of the decision plays out over the next few months."

The familiar forecasts of rising prices gained added impetus last week when Goldman Sachs said Brent crude could spike above its $82.50 summer forecast, and Bank of America Merrill Lynch warned that Brent could hit $100 per barrel by next year; however, not everyone thinks this is a nightmare scenario: Pierre Andurand, founder of Andurand Capital management, last month said $300 oil is possible with a few years and that $100 oil would encourage much-needed industry investment.