Janice R. Andrews
As international markets recovered from a recent decline, oil prices increased as traders kept a tight eye out for any Iranian reprisals against Israel. After posting a little increase on Tuesday, West Texas Intermediate (WTI) increased by about 3%, closing above $75 per barrel. This rebound comes after a precipitous fall that sent oil prices plunging to seven-month lows during a sell-off in global shares.
A significant unwinding of currency carry trades contributed to the recent decline in petroleum prices and the resulting unprecedented market volatility. The Bank of Japan responded by taking action to calm markets and reassure investors.
Concerns about geopolitics are exacerbating market fear. A possible Iranian attack on Israel in revenge for the killings of Hamas and Hezbollah leaders has the Middle East on high alert. To add to the geopolitical tensions, Ukrainian military conducted an uncommon cross-border incursion into Russia.
Production at Libya’s biggest oil field was shut down earlier this week, which made matters worse. After the internationally recognized government accused certain groups of engaging in “political blackmail,” the National Oil Corporation decided to put the Sharara oilfield under force majeure. Previously, 270,000 barrels were produced daily from this area.
In contrast to the American Petroleum Institute’s forecast of a 176,000-barrel gain, official statistics in the United States showed that oil stockpiles decreased by 3.73 million barrels last week. The market received some support from this sudden drop in stocks.
But there are still a lot of obstacles for oil prices to overcome. Major economies like the US and China continue to have unclear demand, and in the upcoming quarter, the OPEC+ alliance may boost supply. The price of oil is still facing challenges from these causes.
Analyst Tamas Varga of brokerage PVM Oil Associates Ltd. offered the following analysis on the state of the market: “Those who are certain that there will be an economic downturn will be content to give up on stocks and commodities for the foreseeable future. But unless there are clear indications of a recession, the rest—likely the majority—will be hesitant to do so.”
The oil market continues to be volatile as traders negotiate these intricate issues. Investors are weighing their fears about slowing demand and possible economic downturns against the dangers of geopolitical war and supply disruptions. As these many factors come into play, the next several weeks will be critical in deciding the direction of oil prices.
