Following the death of Qassem Soleimani, the next big question will be how the Iranians respond and if they target the petroleum industry, the president of Strategic Energy & Economic Research said.
The U.S. assassination of one of Iran’s top military commanders sparked a rally in the oil market, but Iran’s next move will dictate whether prices will see a gain that lasts.
“We are likely to see oil prices march a bit higher, but I don’t see huge increases unless there are follow-up skirmishes, battles, and sabotage in the Persian Gulf,” said Tom Kloza, head of energy analysis at the Oil Price Information Service. “Oil’s reaction today is very muted and I suspect professional traders don’t want to make the same mistakes they made after the mid-September Abqaiq attacks in Saudi Arabia.
For now, the latest escalation in the U.S.-Iran conflict “will provide for stronger-than-anticipated [price] numbers in January, but Iran exports very little oil nowadays so further suppression of their capability doesn’t have any impact,” Kloza said, referring to the Iranian general’s assassination as a “Black Swan” event that look to be a “one-off, just as the Abqaiq attack was.”
“Oil prices are likely to push higher in the near term as geopolitical tensions in the Middle East trigger fears over negative supply shocks in the markets,” said Lukman Otunuga, senior research analyst at FXTM. “Given how the region is home to major oil-producing countries that supply roughly 25% of the world’s oil, the path of least resistance for the commodity points north.”
It’s important to keep in mind, however, that the U.S., as well as other producers that are not part of the Organization of the Petroleum Exporting Countries, continue to see strong output.
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