During the Asian session on Thursday (January 9), international oil prices bottomed out and rebounded.
Oil prices hit their biggest drop in three months on Wednesday, giving up gains after the United States assassinated a top Iranian general. U.S. President Trump downplayed the impact of Iran’s attack on U.S. military bases in Iraq, suggesting no further military action was needed.
In terms of data, EIA crude oil and refined oil inventories both unexpectedly increased, further causing oil prices to expand their decline. The daily high and daily low price differences of U.S. oil and Brent oil on Wednesday were respectively The highest levels since November 2014 and September 2019.
Iran has stopped after the missile attack? Tensions in the Middle East cooled
Tensions in the Middle East escalated again on Wednesday, with Iran firing missiles at multiple U.S.-Iraqi joint air bases in retaliation for the killing of top Iranian general Soleimani by the U.S. military last week. Kill one thing. The retaliation rocked financial markets and disrupted air traffic but caused no casualties.
Trump announced that he would impose more sanctions on Iran, but also said that Iran seemed to have stopped. Speculation of an immediate escalation in tensions in the Middle East appears to have cooled, given that no Americans were killed.
Trump abandoned days of angry rhetoric against Iran as the two countries tried to defuse the crisis triggered by the U.S. killing of Iranian military commander Soleimani. He said in a speech at the White House, “We have a strong military and equipment, but that does not mean we have to use it.”
Iranian Foreign Minister Javad Zarif tweeted on Wednesday that Suleiman After Ni was killed, the Iranian government completed “reciprocal self-defense measures.” He said, “We do not seek to escalate the situation or start a war, but will defend ourselves against any aggression.” Türkiye has signaled its willingness to mediate between the United States and Iran. Iraq said it received verbal notification from Iran before it launched the attack.
Extreme volatility may best describe today’s price action as crude oil sells off, down about 9% from overnight highs.
Investors believe that tensions between the United States and Iran appear to be showing signs of easing. As the President of the United States and the Foreign Minister of Iran successively sent out signals of at least temporary calm on Twitter, oil prices have Pulling back from overnight highs. The daily high and daily low price differences between U.S. oil and Brent oil on Wednesday were the largest since November 2014 and September 2019 respectively.
OPEC+ continues to pay attention to the security of crude oil supply, and geopolitics re-affects oil prices
OPEC+ continues to pay attention to the supply of crude oil Safety, compliance figures for the group’s production-cut deal look to be getting better all the time. Crude oil demand is solid, global crude oil inventories are currently “circling” around the five-year average, and geopolitics has once again become a factor affecting oil prices.
In December 2019, the data on compliance with production cuts became better. The listing of Saudi Aramco will not affect its role in OPEC. Iraqi oil production continues and production equipment is safe. Despite the current tense situation, The market is optimistic that Iraq will reach 100% compliance with the OPEC production reduction agreement in a timely manner.
Expressed concern about the demand for crude oil in the United States and saw that the estimate of crude oil demand has been significantly revised. The growth rate of global oil demand is forecast to be about 1 million barrels per day. This level is “not strong but not disappointing either.” “People are worried.” In the first quarter and second quarter, the market oversupply was 700,000 barrels per day and 900,000 barrels per day respectively. OPEC alone cannot bear the responsibility of maintaining the stability of the oil market.
OPEC does not believe that the conflict between Iran and the United States will evolve into a war. U.S. shale oil supply is expected to decrease, and it does not believe that the United States wants to become more aggressive in the Middle East. OPEC will respond if necessary, but with restrictions in place to replace possible oil shortages.
United Arab Emirates Energy Minister Suhail Al Mazrouei said that unless the situation escalates catastrophically, no supply shortage is expected; OPEC Secretary-General Mohammad Barkindo emphasized that he believes in our leadership People are doing everything possible to bring the situation back to normal.
OPEC officials promised to maintain supply, a factor driving the decline in oil prices. The world economy cannot bear an oil price of US$100 per barrel. Iraq and Nigeria have improved in complying with oil production cuts and do not want the United States to create more confrontation in the region.
Although the flow of oil from the Middle East remains unimpeded for now, the risk of disruption is affecting the crude oil market. Most exports from the Gulf, including those from Saudi Arabia, Iran and Iraq, pass through the Strait of Hormuz. Iran has repeatedly threatened to block the strait in the event of war. Once a blockade is implemented, oil prices will surge again.
Five reasons why oil prices failed to rebound significantly amid the conflict between the United States and Iran
1. The US-Iran crisis is expected to gradually ease
The trend of oil prices in the next few days will largely depend on how the United States responds. Many traders viewed the U.S. decision not to immediately retaliate following the Iranian missile attack as a sign that it did not want to escalate the situation into a full-scale conflict.
The coming period will be “relatively calm” because the Iranian military appears to have provoked the situation and responded forcefully enough without triggering an immediate military response from the United States. , realizing the so-called revenge against the United States for the general who was killed. If an American is killed in public, that’s what really matters, the trader said.
Former White House adviser Bob McNally also believes that Iran��The missile attack appears to have been deliberately planned to avoid killing American soldiers. But he warned that the attack may not be the end of Iran’s retaliatory campaign.
2. Tanker groups are taking a wait-and-see attitude
Although Iran’s attack did not target oil infrastructure, the energy market was not unscathed. Saudi Arabia, the world’s largest crude oil exporter and a key U.S. ally, suspended oil shipments through the Strait of Hormuz.
The Saudi National Shipping Company (Bahri) transports crude oil through the strait, which is also a crude oil transportation channel for Iraq, Kuwait, the United Arab Emirates and Iran.
In 2019, oil tankers in the Persian Gulf were targeted in attacks, with Iran suspected of carrying out the attacks in response to renewed U.S. sanctions on the country’s oil exports. The United States also blamed Iran for an attack on Saudi oil facilities in September that caused a brief drop in the kingdom’s oil production.
Other tanker operators are also taking precautions, such as only crossing the strait during daylight hours, shipbrokers said.
3. OPEC and its allies can increase oil supply
The oil market is warming to tensions in the Middle East The cautious response is partly due to the fact that any supply tightness currently is largely man-made.
For much of the past three years, OPEC and its allies such as Russia have been cutting crude output to offset a surge in output from the U.S. shale oil industry.
If oil prices rise too high, Trump is expected to pressure allies within OPEC, including Saudi Arabia and the United Arab Emirates, to increase production to help stabilize the market. Before Tuesday’s missile attack, Trump said he had discussed oil prices with Saudi Deputy Defense Minister Khalid bin Salman.
Trump gave up on military confrontation with Iran on Wednesday. He said that Iran seemed to be calming down after attacking two Iraqi bases hosting US troops in Iraq.
Still, severe damage to the Strait of Hormuz could threaten the Gulf state’s ability to deliver more oil to the market, even if Saudi Arabia increases output.
4. Oil prices are already high
Some traders said that the response to oil prices was limited only because it had risen sharply in the fourth quarter of 2019. With the Oil prices rose by about $10 per barrel as concerns about slowing global economic growth and tensions in international trade relations receded.
Hedge funds have made big bets on oil prices. This suggests that hedge funds may be reluctant to believe in rising risks to their portfolios without evidence of actual supply disruptions.
Bjarne Schieldrop, chief commodities analyst at Nordic Bank (SEB), said that oil supply has not decreased due to recent tensions in the Middle East, which is why oil prices have fallen so quickly.
5. Higher oil prices stimulate an increase in supply
In the mind of every oil trader, there is such a simple calculation. With the rise of U.S. shale oil With the rise of the industry, this calculation can be said to have become more relevant.
Although shale oil’s breakneck growth is expected to slow in 2020 as companies focus more on making money than boosting drilling, higher oil prices are likely to prompt the shale oil industry to respond quickly and increase production, And that could dampen enthusiasm among oil traders.
Brent Oil Daily Chart
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