Just
as tensions in the Middle East began to escalate, it seemed that
regional, political and military factors will significantly influence
oil price increase in the long term. Yet, it proved that no more than a
week after a partial relief, crude oil prices are 10 % down, Gulf
Brokers reported.
While price
of Brent Crude oil marker grew to 70 USD per barrel shortly after the
attacks, it declined to 64 USD per barrel on 16th January. Furthermore,
price of West Texas Intermediate (WTI) declined to 58 USD per barrel
compared to previous price of 65 USD per barrel shortly after the
attacks.
Tensions
between Tehran and Washington, which were triggered by US airstrikes in
Iraq, escalated by Iran's attack on US-led forces in Iraq and culminated
by plane crash in Tehran, undoubtedly caused negative sentiment in
Asian markets and affected oil prices. There is no doubt that if the
US-Iran quarrel escalated, the 'black gold' market would be hit severely
and cause price growth in tens of per cent.
Export share
through the Strait of Hormuz represents about 20% of global oil
consumption, which is 21 million oil barrels daily. Suspension of the
Strait of Hormuz could significantly affect export, however, suspension
of the strait between Iran and Oman could be perceived as even more
powerful impulse for oil prices on capital markets. Some estimations
even argue that the value could be 100 USD per barrel, which is very
close to price from 2014.
The weakest point of the chain could then be China, which imports about 40% of oil from the Middle East for its own consumption.
On the other
hand, quick recovery to more stable price development supports opinion
that there are trends showing increasingly huge impact on oil markets.
Sustainability policies of all major world economies resulting in
e-mobility, renewables and energy savings is one of current trends.
Another trend is increasing diversification within global fossil fuel
markets, which were launched by massive US shale gas exploration a
decade ago.
Syam KP
Chief Analyst
Gulf Brokers
Chief Analyst
Gulf Brokers
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