Is the price of oil falling, because the rally feared due to tensions in the Middle East has not - yet - occurred?
The price of oil has fallen dramatically and has removed - for now - the specter of the $100 a barrel expected with an escalation in the Middle East.
Why did crude oil stop its run almost immediately, even though the winds of war between Israel and Iran were not averted at all? Traders and analysts are also considering other price drivers that suggest uncertain demand and not-so-limited supply.
Brent crude oil and WTI futures were down about 0.6% at the time of writing, at $86.69 and $82.06 a barrel, respectively, after falling 3% in the previous session.
Oil prices falling, will there be no rally? What to observe
Oil prices are falling as traders have already priced in the risks of a broader war in the Middle East, while the fourth consecutive weekly rise in US crude inventories and the interest rate outlook higher for a longer period weigh on sentiment.
US inventories increased by 2.7 million barrels last week, while fuel demand indicators fell. This adds to signs of a market that has cooled after a rally earlier this month in anticipation of Iran’s attack on Israel last weekend. A premium of between $5 and $10 a barrel is currently expected due to tensions, but futures could collapse without an escalation, Goldman Sachs Group said.
“The IEA report yesterday was not bullish, add to that some premium for decreasing geopolitical risk and that explains some of the price declines”, said Giovanni Staunovo, commodities analyst at UBS Group AG.
“Israel’s lack of an immediate response to Iran’s weekend attack saw the market reduce the geopolitical risk premium”, analysts at ANZ Research also confirmed. Fears of a widening conflict continue to keep markets on edge, but the fact that no physical barrels have been withdrawn from the market and that OPEC+ has significant spare capacity reassures investors.
Also in focus is the demand factor, which remains weak, especially considering the Chinese uncertainty. JP Morgan analysts highlighted in a note that global oil consumption so far in April has been 200,000 barrels per day (bpd) below forecasts, averaging 101 million barrels per day. Since the beginning of the year, demand has increased by 1.7 million barrels per day, down from the November forecast of 2 million barrels per day.
Crude oil, price can still fluctuate
Oil remains sharply higher year-to-date, however, as supply cuts by OPEC+ members and geopolitical risks in the Middle East and Russia have combined to support prices. The rally had sparked speculation that crude oil could regain $100 a barrel, although the rise has now faltered, with some market metrics indicating slightly less restrictive conditions.
US sanctions are also back in the spotlight. President Joe Biden’s administration has reimposed restrictions on Venezuelan oil, ending a six-month truce in a move that could hamper flows from the South American nation. At the same time, new sanctions on Iranian oil were included as part of a package released by House Republicans, which is scheduled for a vote later this week.
Original article published on Money.it Italy 2024-04-18 11:58:05. Original title: Prezzo petrolio, perché il rally si allontana?
