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Crude jumps over 4% on reports of Israeli missile strike on Iran - April 19, 2024
Iran attack fears rattle oil market but may be overdone - April 12, 2024
We were prescient once again, predicting in last Friday’s Viewsletter that whether or not the Gaza situation was on the cusp of a de-escalation, heightened volatility in crude was guaranteed.
Crude’s pullback at the start of this week on renewed hopes of a Gaza ceasefire deal proved to be small and short-lived. The US on Thursday warned that Iran was planning a direct strike on Israel in retaliation for a deadly attack on its Damascus consulate on April 1 and crude was on the boil as we closed this report late-Friday evening in Asia.
Front-month Brent futures had vaulted well above $91 in intraday trading, up more than 2% from Thursday’s settle.
But could the fear that crude appears to be pricing in – a major Iranian strike, an Israeli response, and other knock-on effects, potentially including a wider Middle East military conflict – be overblown? We think so.
Also in this issue:
Mar 2024: Mildly bearish near-term; neutral for April - March 15, 2024
After weighing all the bullish and bearish influences on crude, our latest Bulls & Bears report concludes:
Token Israeli strike on Iran confirms little appetite to risk war - April 19, 2024
What a roller-coaster day! Crude prices began the day with a bang (pun unintended) and were on course to end it in a whimper.
Brent, having drifted down to $87 by Thursday as the market cautiously pushed aside the fear of a dangerous military escalation in the Iran-Israel conflict, surged more than 4% in the early hours of Friday and looked poised to vault above $91 on news that Israeli had mounted aerial strikes on Iran, Iraq and Syria.
But within hours, Iran had downplayed the strikes, which appeared to have been limited indeed and caused no damage, while Israel said they were intended as a limited response, designed to avoid further escalating regional tensions.
Brent futures had slid below $87, slipping about 1% into the red, by Asian evening.
Our key takeaway from the latest events and last Saturday’s orchestrated Iranian barrage of 300 drones and missiles fired at Israel that were repelled without any damage is that the arch rivals, despite their nasty rhetoric, are exercising restraint in their collision.
Of course, no one can rule out the situation spiralling out of control in a highly fragile and volatile region. But you, our regular readers, know that it has not been our base case -- and it still isn’t.
OIL IN 2024: Easing demand to weigh on crude, test OPEC+ unity - Dec. 22, 2023
As oil market participants turn the page into 2024, they are contemplating a picture of a global economic slowdown crimping demand growth, even as robust output growth from the US and a few other producers outside the OPEC/non-OPEC alliance tilt the balance towards oversupply.
Questions are swirling around the survival of OPEC+ and its supply management strategy in the face of new challenges awaiting it in the coming months. As Angola’s decision to quit OPEC this week shows, under the veneer of cohesion in the 22-member group, cracks are likely widening, especially on account of members who have lost substantial production capacity after effecting the deepest cuts ever through the Covid-induced demand destruction.
What else does the crystal ball show for the oil market in 2024? Sweet crude prices averaged 18% lower this year, bringing relief from last year’s 40% annual jump. What might next year look like?
We highlight the key elements to keep an eye on and take a closer look at the characteristics of the three main components of next year’s market: Supply, Demand and the Economy.
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