【Oil prices just hit a six-month high, but Qatar’s move has spooked the bulls】
On Monday, U.S. and Brent crude opened about 1.2% lower as the market once again bet that tensions in the Middle East would ease. The latest reports say Qatari mediators traveled to Tehran to advance negotiations, sending crude prices down from their highs. Brent $BZ had earlier come close to $117 a barrel, and surged about 3% on Friday.
One thing to be clear about: a small drop in oil prices does not mean the supply crisis is over. Recent Houthi attacks on Saudi energy facilities and the risks to shipping through the Strait of Hormuz remain. The market is worried about whether crude can continue to be shipped normally. Diplomatic news first eases the risk premium; a genuine recovery in supply will depend on negotiations and whether shipping sees tangible progress.
Today’s lower open looks more like traders taking some geopolitical premium off the table than a reversal in the trend for oil prices. Keep an eye on two things next: whether mediation produces concrete results, and whether tankers can pass through safely and energy facilities avoid further attacks. As long as supply risks remain unresolved, oil prices could continue their roller-coaster ride: “down on peace talks, up on reports of attacks.”
On Monday, U.S. and Brent crude opened about 1.2% lower as the market once again bet that tensions in the Middle East would ease. The latest reports say Qatari mediators traveled to Tehran to advance negotiations, sending crude prices down from their highs. Brent $BZ had earlier come close to $117 a barrel, and surged about 3% on Friday.
One thing to be clear about: a small drop in oil prices does not mean the supply crisis is over. Recent Houthi attacks on Saudi energy facilities and the risks to shipping through the Strait of Hormuz remain. The market is worried about whether crude can continue to be shipped normally. Diplomatic news first eases the risk premium; a genuine recovery in supply will depend on negotiations and whether shipping sees tangible progress.
Today’s lower open looks more like traders taking some geopolitical premium off the table than a reversal in the trend for oil prices. Keep an eye on two things next: whether mediation produces concrete results, and whether tankers can pass through safely and energy facilities avoid further attacks. As long as supply risks remain unresolved, oil prices could continue their roller-coaster ride: “down on peace talks, up on reports of attacks.”