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Oil Traders Brace for Iran Escalation After U.S. Elections
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Oil Price
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Oil traders are bracing for a possible resumption of hostilities with Iran after the U.S. midterm elections, with ING analysts warning that prices are likely to fall if no escalation occurs. Still, the market's muted reaction to reports of recovering Hormuz flows and rising tanker attacks suggests that any de-escalation may have only limited impact on prices.
Oil traders appear to be preparing for a resumption of hostilities in the Middle East following the U.S. midterm elections on November 3, and if such a resumption does not take place, oil prices are likely to drop, ING commodity strategists wrote today in a note.
With President Trump repeatedly hinting at or outright saying he may restart attacks on Iran after the midterms, anticipation of new hostilities is only to be expected. However, as ING’s Warren Patterson and Ewa Manthey wrote, the escalation is not a done deal. And if it does not come to pass, there is only one way prices would go: down.
“An agreement between the US and Iran may not be needed for prices to pull back,” the analysts wrote. “If we get past the elections without renewed strikes on Iran, that might be enough for the market's risk premium to start eroding.”
However, the significance of any hypothetical oil price decline is questionable, based on the market’s reaction to all those reports about oil flows out of Hormuz returning to—and even exceeding—pre-war levels. Initially, those reports did weigh on prices, but later the effect wore off as those reports clashed with others, about Iranian strikes on tankers, which have reached an all-time high this month. The attacks also show that the situation in the Persian Gulf is not back to business as usual.
Interestingly, while the crude oil market adopts a wait-and-see attitude, diesel prices are down following reports of Russian diesel on its way to the United States. Despite analyst assertions that the volumes agreed are too insignificant to change the market balance, the ICE gasoil crack spread, ING analysts said, is down to $70 per barrel, the lowest since early October and off record highs hit last month amid the global disruption in supply.
By Irina Slav for Oilprice.com
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With President Trump repeatedly hinting at or outright saying he may restart attacks on Iran after the midterms, anticipation of new hostilities is only to be expected. However, as ING’s Warren Patterson and Ewa Manthey wrote, the escalation is not a done deal. And if it does not come to pass, there is only one way prices would go: down.
“An agreement between the US and Iran may not be needed for prices to pull back,” the analysts wrote. “If we get past the elections without renewed strikes on Iran, that might be enough for the market's risk premium to start eroding.”
However, the significance of any hypothetical oil price decline is questionable, based on the market’s reaction to all those reports about oil flows out of Hormuz returning to—and even exceeding—pre-war levels. Initially, those reports did weigh on prices, but later the effect wore off as those reports clashed with others, about Iranian strikes on tankers, which have reached an all-time high this month. The attacks also show that the situation in the Persian Gulf is not back to business as usual.
Interestingly, while the crude oil market adopts a wait-and-see attitude, diesel prices are down following reports of Russian diesel on its way to the United States. Despite analyst assertions that the volumes agreed are too insignificant to change the market balance, the ICE gasoil crack spread, ING analysts said, is down to $70 per barrel, the lowest since early October and off record highs hit last month amid the global disruption in supply.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com
Oil Prices Climb as Houthi Attacks Reignite Saudi Supply Fears
US Crude Oil Inventories Buck Analyst Expectations
Ras Tanura Fire Follows Attacks on Aramco Offices and Near Shaybah Field
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Tags:#النفط#إيران#مضيق هرمز#الشرق الأوسط#أسعار الطاقة#الديزل
Source: Oil Price
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