the worst may be behind us

Crude oil falls more than 4% in markets (a barrel of Brent fell to $72) due to the “bump” of the geopolitical risk premium that has inflated the price of crude oil in recent months. This drop in crude oil prices came after Israeli attacks on Iran bypassed oil facilities and other vulnerable points. Moreover, after the attack Iran’s leaders played down the damage and left a somewhat ambiguous message.: The answer should not be small or exaggerated. Thus, US President Joe Biden has made it clear that this could be the end of the military “coup” between both countries, which raises some hopes in the region and reduces oil prices: the worst possible scenario. the conflict could be left behind. This deflates the risk premium for crude oil, which has been at high levels (there was talk of $20-30 per barrel).

Oil has reached fell more than 5% at its lowest point after Iran confirmed its oil industry was operating normally following Israeli attacks on military sites across the Persian country in retaliation for rocket attacks earlier this month. It all happened early last Saturday morning when the Israeli army launched what it called “precision attacks on military targets” Iran, he noted, in retaliation for “months of continuous attacks by the Iranian regime on the State of Israel.” However, the oil futures market is closed on weekends. So this morning (Spanish time) investors suddenly priced the event.

Moreover, despite everything, Iranian authorities downplayed the attacks, which they said caused only “limited damage.”. In this context, the Palestinian Islamist group Hamas, which de facto controls the Gaza Strip, has demonstrated its readiness for an agreement with Israel as long as Israeli Prime Minister Benjamin Netanyahu “remains committed to what has already been agreed upon,” according to a statement from the organization’s top official. It appears that some superior force is forcing Iran and Israel to be more restrained in their actions to avoid a possible oil crisis that would revive inflation and bring developed world governments to a standstill.

Weighted answer

“Israel’s measured and targeted response raised hopes for de-escalation.”Warren Patterson, head of commodity strategy at ING in Singapore, writes about this. “If we see some de-escalation, it will allow fundamentals to dictate price direction again.”

In addition, andUnited States President Joe Biden expressed hope this Saturday that Israel’s attacks on Iran will end a period of tension in the Middle East that has raised fears of a regional war. “It looks like they only hit military targets. I hope this is the end,” Biden told reporters in Pennsylvania, where he will attend several events ahead of the Nov. 5 election.

Biden noted that he was previously briefed on Israeli attacks in response to Iran’s Oct. 1 attack. which included up to 180 ballistic missiles against Israeli territory, which led to an oil explosion on the same day. An Israeli attack launched at dawn on Saturday has killed at least four Iranian soldiers in the past few hours, according to the Israeli army.

Power of Oil Supply

In addition to the geopolitics driving crude oil today, the market faces a stable supply environment that has kept oil bulls at bay for most of the year. Before the exchange of blows between Israel and Iran, the price of Brent oil fell below $70, which a few months ago would have been completely unthinkable in the context of deep OPEC cuts and the endless war between Russia and Ukraine. Added to this is the threat of falling prices from Saudi Arabia due to idle production capacity.

Analysts Goldman Sachs Last week they said the market’s focus was shifting from conflict in the Middle East to “risks of oversupply in 2025” as OPEC members plan to reverse voluntary production cuts this year. Moreover, they explained In previous periods of supply disruptions, Saudi Arabia and the United Arab Emirates alone covered about 80% of the shortfall “within two quarters,” according to the report. Financial Times.

Thus, according to Bloomberg, the price of Brent oil, the benchmark in Europe, fell by 4.5% to $72.5. Similarly, US benchmark West Texas Intermediate (WTI) fell 4.47% to $68.57.