(BFM Bourse) – Black gold prices have been propelled for several sessions by the threat of widespread conflict in the Middle East. Geopolitical risk thus dominates the market which would otherwise be depreciated by difficult fundamentals.
Black gold prices have recorded a spectacular rebound. From Tuesday to Thursday, the December contract on Brent from the North Sea regained 8.64% in three sessions to rise to 77.90 dollars per barrel while that of November on WTI listed in New York regained 8. 45% to $73.93 per barrel.
Oil prices have been catapulted since Tuesday by the significant increase in tensions in the Middle East. Iran launched an attack of around 200 ballistic missiles on Israeli territory. Since Tehran and the Hebrew state have increased mutual threats and the market fears a broader conflict in the region which would have a significant impact on oil production.
On Thursday alone, oil prices jumped 4% for Brent and more than 5.2% following statements by American President Joe Biden. The White House tenant indicated that the United States was discussing a potential attack by Israel on Iran’s oil infrastructure.
“The escalation of the conflict in the Middle East between Israel and Iran has caused the price of oil to rise sharply. The rise was particularly strong yesterday after comments by the US president suggesting that Israel could strike Iranian oil installations, in order to respond to the missile attacks fired by the Iranians to ‘avenge’ the elimination of the leaders of Hezbollah”, explains Sebastian Paris Horvitz, of LBPAM.
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Iran, 4% of world production
According to data from the US Department of Energy, Iran produced 4 million barrels per day of oil in 2023, which represented around 4% of global production.
“The greatest fear, in a market which is potentially oversupplied given the unused capacities in the Gulf countries, is that the conflict will spread and that the impact on the oil production of the entire region is affected. Although such a possibility does not really seem to be reflected in barrel prices, it is certain that the market has reintroduced a geopolitical risk premium on oil prices”, judges Sebastian Paris Horvitz.
“Most traders believe that an attack on Iranian oil fields would massively disrupt oil supplies, because Iran’s retaliation would be even more tense,” said Naeem Aslam of Zaye Capital.
It remains to be seen whether a conflagration of the situation will actually occur. The bank UBS was counting, in a note published Wednesday, on an “absence of total war between Iran and Israel”, the establishment judging that Tehran had been able to “signal its determination” with Tuesday’s attack without really wanting to go further. far.
Beyond geopolitical risk, oil fundamentals remain quite shaky. The slowdown in global growth, particularly in China, is weighing on demand while Saudi Arabia, tired of losing market share, could increase its production, as the Financial Times reported last week.
“Until the geopolitical situation in the Middle East calms down, oil prices will always be at risk of skyrocketing. But in the context of falling demand and greater supply in the oil market in the sense broad, the risks weighing on oil prices over the next year are undoubtedly tilted to the downside”, summarizes David Oxley, of Capital Economics, in a note.
“The fact that OPEC+ (the organization of oil exporting countries and their allies) is currently pumping well below capacity – and therefore has the potential to increase production if Iranian oil supplies are disrupted – limits the potential for a prolonged increase in the price of oil For comparison, Iran accounts for about 4% of global oil production, but OPEC as a whole currently limits oil production by the equivalent. almost 6% of world production,” he explains.
Julien Marion – ©2024 BFM Bourse
