There is no doubt that the geopolitical crisis since the beginning of 2020 has had a very significant impact on the rise and fall of international oil prices.
Affected by US-Iran relations, oil prices soared and plummeted at the beginning of the year!
On January 2, U.S. President Trump ordered the bombing of Iran’s senior military general Soleimani, which triggered rising anti-American and revenge sentiment in Iran, causing the United States and Iran to The risk of war has greatly increased, and international oil prices have been rising as a result. On January 3, the U.S. WTI crude oil futures market price rose to $63.05/barrel, an increase of $1.87, and the Brent crude oil futures price rose to $68.6/barrel, an increase of $2.35.
Tensions between the United States and Iran reached a climax on January 8. Iran launched multiple missiles at U.S. military bases in Iraq. International oil prices rose by $4 within a few hours. However, the situation quickly changed. The United States announced that there were no casualties. Trump later stated that he would launch “unconditional negotiations” with Iran.
The cooling of the situation between the United States and Iran has reduced the risk of supply cuts in the oil market, and international oil prices have also fallen sharply. As of the close on January 8, the price of light crude oil futures on the New York Mercantile Exchange fell by US$3.09 to close at US$59.61 per barrel, a decrease of 4.93%; the price of Brent crude oil futures in London fell by US$2.83 to close at US$65.44 per barrel. The decrease was 4.15%.
The closure of the pipeline from Libya’s largest oil field ahead of peace talks could exacerbate oil supply disruptions
However, as soon as the impact of geopolitical tensions between the United States and Iran subsided, something went wrong in Libya again. According to Bloomberg Global Finance, Libyan protesters recently shut down an oil pipeline, which may lead to a shutdown of the country’s largest oil field. The move will exacerbate Libya’s oil supply disruptions ahead of an international conference urging an end to Libya’s civil war.
Informed sources revealed that demonstrators closed the valve of the Hamada pipeline north of the Sharara oil field. The suspension of Hamada production may lead to the gradual closure of the 300,000 barrels per day oil field.
Libya’s oil production has dropped from 1.17 million barrels per day since eastern military commander Khalifa Haftar blocked exports from ports he controls, according to a statement from Libya’s National Oil Company about 800,000 barrels. Libya’s National Oil Company declared force majeure, which would allow Libya to legally terminate oil delivery contracts. Libya has Africa’s largest proven oil reserves.
Haftar is preparing to attend an international conference hosted by German Chancellor Angela Merkel in Berlin, where he will face pressure to reach a ceasefire in the civil war. Haftar’s troops have surrounded the Libyan capital Tripoli and he has so far refused to stop the offensive and reach a compromise.
Affected by this incident, coupled with the recent signing of the first phase of the trade agreement between China and the United States, the U.S. Senate passed the U.S.-Mexico-Canada Trade Agreement, and the improvement in trade prospects has supported market sentiment. On the 20th, national oil prices opened higher. WTI futures for February delivery on Nymex rose 88 cents to $59.42 a barrel; they had risen as much as $1.19. February WTI closed 2 cents higher on Friday at $58.54 a barrel, but fell 0.9% for the week. Brent crude oil futures for March delivery on London’s ICE Futures Europe rose 95 cents, or 1.4%, to $65.80 a barrel; they rose 23 cents on Friday to $64.85 a barrel.
How will future geopolitical crises such as the situation in Iran affect oil prices?
However, the current situation in the Middle East, especially in Iran, will still have a greater impact on international oil prices. The Strait of Hormuz is responsible for nearly 40% of the world’s oil export supply. Although the current situation in Iran has eased, relations between the United States and Iran are still very tense. The Trump administration not only quickly imposed new sanctions, but also demanded that Iran return to the negotiating table and sign the “Trump version” of the Iran nuclear deal. Recently, Britain, France and Germany have also put pressure on Iran, demanding that Iran return to the framework of the Iran nuclear agreement and renegotiate with the United States. Iran faces increasing pressure from Western powers.
At the same time, the plane crash and people’s livelihood crisis have led to deepening public dissatisfaction and continuous domestic protests, making Iran’s ability to maintain political stability under high pressure also aroused great concern. In summary, the future impact of the situation in Iran on international oil prices is as follows:
First, the possibility of U.S.-Iran relations becoming tense again in the future still exists. Oil prices bear the brunt.
After Soleimani’s death, Iran made rational concessions due to the asymmetry of power with the United States, and the United States had no intention of engaging in a full-scale war with Iran, making the United States and Iran The likelihood of war is greatly reduced. However, the United States is still tightening its all-round suppression of Iran. It can even be seen from the recent remarks of Trump and US Secretary of State Pompeo that the United States has a strong tendency to “pursue victory.”
The main contradiction leading to the current game between the United States and Iran is no longer the death of Soleimani, but the nuclear issue. Trump emphasized at the beginning of his speech after Iran launched missiles to attack US military bases, “As long as I am president, Iran will not be allowed to possess nuclear weapons.” ���Peo recently delivered a speech at Stanford University, publicly stating that the maximum pressure on Iran will be further intensified, and Iran’s oil export channels will be completely cut off, while diplomatic isolation and military deterrence will be implemented against Iran.
Judging from Iran’s response, Iran has sent a complex signal of both toughness and relaxation. On the one hand, President Rouhani claimed that the current stockpile of enriched uranium has exceeded the level before the 2015 Iran nuclear agreement, and gave a tough response to Britain, France and Germany’s demands that Iran continue to comply with the Iran nuclear agreement. Supreme Leader Khamenei delivered a speech at a collective prayer on Friday, January 17, calling the United States a “clown”, criticized Britain, France, and Germany for submitting to the will of the United States, and vowed that Iran will fight to the end. But on the other hand, Iranian Foreign Minister Javad Zarif said that the door to peace talks has not been closed and Iran will continue to cooperate with the International Atomic Energy Agency.
However, as long as Iran continues to break through the limits on uranium enrichment, the crisis caused will continue to deepen, and it will also provide the United States with excuses and opportunities to continue to pressure Iran. Israel has always stated that it will never allow Iran to possess nuclear weapons. If Iran returns to its old path of nuclear weapons research and development, the conflicts between the United States and Iran and between Iran and Israel will become acute again. Although it is unlikely that Iran will close the Strait of Hormuz, oil tankers passing through the Strait of Hormuz will once again be threatened by war, and international oil prices may surge rapidly in the short term.
Second, another variable that affects international oil prices is the security situation in Iran’s neighboring countries.
This mainly refers to whether the oil fields or infrastructure of Saudi Arabia and even the United Arab Emirates, which have tense relations with Iran, will be attacked. Due to the large number of terrorist groups and other non-state armed groups in the area, it is difficult to determine who will be the attacker. But what is certain is that if an incident like the attack on Saudi oil fields in September 2019 happens again, the United States will immediately target Iran. It is unlikely that countries such as Saudi Arabia will go to war directly with Iran, but the deterioration of bilateral relations will definitely stimulate a rise in oil prices in the short term.
Third, what can affect international oil prices are changes in Iran’s political situation itself.
Iran is at a crossroads: whether to continue to confront the United States, or to seek compromise and devote itself to developing the domestic economy and improving people’s livelihood at the expense of some interests. The parliamentary election held in February this year will be an important bellwether for political changes in Iran. However, Iran’s history over the past 40 years shows that it is difficult for the current government to abandon the old path of confrontation with the United States, and at the same time, there is a risk of popular protests and regime change. Changes in Iran’s political situation will produce a series of complex geopolitical effects and will also have multiple impacts on international oil prices. </p
