Iranian oil industry facilities in Mahshahr, Khuzestan province, southern Iran.
Kavi Kazemi | Getty Images
Oil prices will remain under pressure for the rest of the year, with Brent crude likely to struggle to reach $80 in the foreseeable future.
Andy Libo
President, Lipow Oil Associates
“Markets are unlikely to believe that Israel’s recent military actions will lead to an escalation that could affect oil supplies,” Citi analysts wrote in a note on Monday. Citi analysts cut their Brent crude price forecasts by one month over the next three years. Barrels $4 to $70.
The oil market also faces a global supply glut.
Andy Lipow, president of Lipow Oil Associates, said, “Because Israel deliberately, and perhaps with the encouragement of the United States, prevented crude oil facilities from being targeted, the oil market returned to a state of oversupply.”
He added that oil production has been increasing not only in major countries such as the United States, Canada and Brazil, but also in smaller countries such as Argentina and Senegal.
“Oil prices will remain under pressure for the remainder of the year, and Brent may struggle to reach $80 in the foreseeable future,” Lipow told CNBC via email.
Saul Kavonic, energy analyst at MST Marquee, said risk premiums have fallen by a few dollars per barrel as the more limited nature of the strike, which includes avoiding oil infrastructure, has raised hopes of a de-escalation.
Oil prices year to date
Kavonik told CNBC that the focus will now be on whether Iran will counter the attack in the coming weeks, which will cause risk premiums to rise again. He pointed out that the overall trend of the conflict is still to escalate, and the possibility of a new round of attacks is high.
At Sunday’s cabinet meeting, Iranian President Masoud Pezeshkian stresses Iran’s right to respond to Israeli attacks.
“We do not seek war, but we will defend our country and the rights of our people. We will respond to aggression accordingly,” he said.
Vivek Dar, head of mining and energy commodities research at Commonwealth Bank of Australia, said market attention will now turn to Hamas-Israel and Israel-Hezbollah ceasefire talks that resumed over the weekend.
“While Israel has chosen a low-aggression response against Iran, we doubt that Israel and Iran’s proxies (namely Hamas and Hezbollah) can achieve a lasting ceasefire,” Dahl wrote in a report.
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