The Oil Market Nervous as Israeli Army Prepares to Attack Iran
Prices in the oil market continued to swing in waves of uncertainty as reports surfaced that the Israeli army has completed its preparation to attack Iran in the coming days. This news has added to the nervousness in the market, especially as the American Petroleum Institute reported another drop in US gasoline inventories and distillate supplies.
Despite a slight increase in crude oil inventories, the market remains tight, with concerns about supplies in Cushing, Oklahoma. Mixed messages surrounding Chinese oil demand have also impacted prices, with conflicting reports about import quotas and refinery runs.
World oil demand has hit a record high for the third consecutive month, reaching 103.79 million barrels per day according to Standard Chartered. This surge in demand raises questions about peak fossil fuel predictions and the need for countries to adjust their energy policies.
In addition to oil, natural gas demand is also expected to increase, particularly in China where demand is projected to jump by over 50% by 2040. While some organizations predict peak demand, others like Cheniere Energy foresee significant growth in Chinese natural gas consumption.
Traders are hedging against supply disruptions in the Middle East by holding a record number of options contracts. The current geopolitical tensions in the region have raised concerns about potential supply disruptions and price spikes in the oil market.
Despite these uncertainties, the market is hopeful that diplomatic efforts, such as Secretary of State Anthony Blinken’s visit to the Middle East, will help avoid further escalations. However, the risk of supply disruptions and rising demand continue to drive market sentiment.
Looking ahead, supply and demand dynamics will play a crucial role in determining oil prices. The market anticipates tight conditions and record-breaking demand in the coming months, with the potential for price spikes if winter weather impacts supply. Overall, the oil market remains volatile, with various factors influencing price movements.