Crude oil prices are flat in early trading in the absence of news that oil supply from the Middle East has suffered from the hostilities between Israel and Iran.
Prices got a push from President Trump, who on Monday urged everyone to leave Tehran, suggesting further escalation in the hostilities, though they have flattened since the post.
“IRAN CAN NOT HAVE A NUCLEAR WEAPON. I said it over and over again! Everyone should immediately evacuate Tehran!” the U.S. president wrote on his Truth Social network.
News of oil tankers burning near the Strait of Hormuz today added further concerns for markets, with Brent crude trading at $72.77 per barrel at the time of writing, and West Texas Intermediate changing hands for $71.27 per barrel.
Prices booked losses on Monday after the initial shock from the missile strike exchange between Israel and Iran started to subside among traders, despite Israeli threats they would start targeting specifically oil and gas infrastructure, and after they hit the South Pars gas field—the largest in the world. Oil supply was not affected, however, so traders took profit.
“The conflict between Iran and Israel is still fresh and brewing, and investor sentiments may still be holding on to the ‘war risks,” Priyanka Sachdeva from Phillip Nova told Reuters.
“Added volatility and caution ahead of the Fed policy decision are further ensuring higher-paced price reactions in oil,” the senior analyst also said.
ING commodity analysts meanwhile noted that the loss of Iranian oil supply would “wipe out the surplus that was expected in the fourth quarter of this year.” Yet they added that “However, OPEC sits on 5m b/d of spare production capacity, and so any supply disruptions could prompt OPEC to bring this supply back onto the market quicker than expected.”
This might also have contributed to the change in trader mood that saw oil fall on Monday, even though OPEC deploying its spare capacity is a hypothetical scenario at the moment, as is the loss of Iranian supply.
By Irina Slav for Oilprice.com
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