Tag Archives: Brent crude

Brent Surpasses $80 Amid Rising Tensions

Brent Surpasses $80 Amid Rising Tensions in the Middle East

Brent crude prices have risen to $80 per barrel, the highest level since August, amid growing concerns that Israel may target Iran’s oil infrastructure.
It continued its upward trend, increasing by 3.7% on Monday, following a surge last week driven by speculation over how Israel will respond to Iran’s missile attack on Tuesday.

 

Content

 

 

 

 

Details

U.S. President Joe Biden said on Friday that he does not have a set timetable for Israel’s response, noting that he is considering options other than targeting oil fields. Rebecca Babin, Senior Energy Trader at CIBC Private Wealth Group, mentioned that concerns are mounting over time, likening the situation to a roller coaster ride, where everyone expects a sudden drop at any moment.

Additionally, U.S. West Texas Intermediate (WTI) crude rose by 3.7%, surpassing $77 per barrel.

 

Middle East Tensions and Their Impact on Oil

The Middle East remains in a state of ongoing tension, as Hamas launched a barrage of rockets towards Tel Aviv, and Israel deployed forces to northern Gaza over the weekend. Meanwhile, Israeli airstrikes and limited ground maneuvers continued in Lebanon. Iran’s oil production, which has nearly returned to full capacity, could be at risk as tensions escalate.

Brent crude recorded its largest weekly gain since January 2023 last week due to escalating tensions in a region that supplies about one-third of the world’s crude oil. A note from Goldman Sachs indicated that Brent could rise to $90 per barrel if Iran’s oil supply is directly affected.

 

 

 

 

 

 

Expectations for Increased Oil Buying Amid Market Moves

Some traders referred to a note from Goldman Sachs that estimated algorithmic traders, known as commodity trading advisors, could unleash up to $40 billion in buying for both Brent and West Texas Intermediate (WTI) if prices rise significantly. These funds, along with other speculators, quickly dismantled their bearish positions over the past week as tensions flared.

 

Reassessing Interest Rate Cut Expectations

In a related development, global markets have reassessed expectations for further interest rate cuts from the U.S. Federal Reserve following a strong jobs report on Friday. Traders no longer expect another half-point cut this year, amid expectations that the U.S. economy will continue to grow and inflation will reignite, leaving little room for rate cuts.

Hurricane Milton, which threatens the Gulf of Mexico, also kept investors on high alert. Chevron evacuated workers from one of its platforms and halted production on Monday.

 

Growing Concerns Over Market Volatility

Oil options markets continue to favor bullish bets, benefiting buyers when futures prices rise. The implied volatility gauge for Brent crude has neared its highest level in nearly a year, while money managers added more net long positions in the global benchmark.

In China, the country’s top economic planner will hold a press conference on Tuesday to discuss a package of policies aimed at boosting economic growth, according to a government notice on Sunday. Analysts expect Beijing to expand public spending as part of its stimulus package.

Scott Shelton, an energy specialist at TC ICAP, said that the market is “severely lacking risk takers,” as many traders have had a tough year, and are unwilling to take on the huge risks of volatility at this late stage of the year.

 

 

Brent Surpasses $80 Amid Rising Tensions in the Middle East

 

Global stock market performance

Global stock market performance: The European stock market was negatively affected by weak risk appetite.
The European Euro Stoxx 600 index recorded a decrease of 0.16% to 469.69 points.
These declines come after statements by the Governor of the European Central Bank, Lagarde,
who indicated weak consumption in the euro area due to the impact of the labour market and increased savings, and this may negatively affect economic growth in the region.

 

Topics
US stock market

Nasdaq index

Red Sea disturbances


US stock market

On the other hand, the US stock market witnessed a clear rise in risk appetite.
This came after a statement by US Federal Reserve member Goolsbee, who indicated that the US economy had improved compared to last year.
He also hinted at the possibility of starting to cut interest rates in the upcoming meetings,
indicating the end of the monetary tightening cycle in the United States.
This ultimately supports the performance of the US stock market.

 

The reasons that contributed to enhancing the positive movements of the Nasdaq index

The preliminary reading of US consumer confidence pushes the Nasdaq index to achieve a historic high

After the initial reading of American consumer confidence during last Friday’s trading,
it presented a positive reading at the level of 78.8, whereas expectations indicated a reading of only 69.8, and the reading for November was around 69.7.

This strengthened the position of American stocks, as the Nasdaq index recorded a clear rise from levels of 17,000 thousand,
with the markets closing at 17,330 thousand, an increase of approximately 1.5% from the time the news was issued.

This contributed to the Nasdaq index returning to positive operations again, with the possibility of continued upward movements.

 

 

How do Red Sea disturbances affect Brent crude prices?

The European oil market is suffering from a shortage, as a result of the turmoil in the Red Sea and the increasing Chinese demand for African oil,
according to reports of traders and data analysts on the London Stock Exchanges.

The Brent crude market and some oil markets in Europe and Africa are witnessing a shortage,
partly due to the delay in shipments of some cargo ships due to them avoiding travel through the Red Sea, hurting supplies.

These disturbances coincide with interruptions in production and increased demand in China,
which intensifies competition for oil supplies that do not depend on their passage through the Suez Canal.

Analysts believe that this crisis has clearly manifested itself in European markets.

In this context, the structure of the Brent crude futures market recorded its highest level in two months,
as a result of tankers moving away from the Red Sea after air strikes from the United States and Britain in Yemen.

Kepler data confirms the decline in the quantities of crude heading from the Middle East to Europe,

as the volume of crude decreased by almost half during December compared to October.

Reports say that problems in the Red Sea have caused delays, causing refiners to resort to covering their needs from local markets,
and the market is suffering from a shortage due to the loss of Gulf supplies.

With other developments such as a decline in Libyan supplies due to the protests and a decline in Nigerian exports,
the global economy is witnessing negative impacts from these disruptions in the oil market.

 

 

Global stock market performance

Oil prices rise as Iranian warship enters Red Sea after US destroys Houthi boat

Oil prices rise as Iranian warship enters Red Sea after US destroys Houthi boat:
 Oil prices rose on Tuesday after Iran sent a warship into the Red Sea,
as the situation remains tense in a waterway crucial to global supplies where ships have been attacked by Houthi rebels from Yemen.
 Global benchmark Brent crude rose 2.5% to $78.The U.S.
West Texas Intermediate index rose 2.5% to $73.43 a barrel during Asian trading hours.


Topics

The Iranian warship

Escalation of conflict

Sailing in the Red Sea stopped

 

 

The Iranian warship

 

Iran said on Monday it had sent the destroyer Alborz through the strategic Bab al-Mandeb Strait,
the country’s state media reported, without giving details of the warship’s mission.
the operations to protect shipping lanes were carried out regularly in the Red Sea.
According to an AP report, the move came after the US Navy destroyed
three boats belonging to the Iran-backed Houthi rebels, killing 10 fighters.
U.S. Central Command said in a statement that the Navy responded
to a distress call from the Singapore-flagged Maersk Hangzhou ship, which came under Houthi fire.
In a statement from a rebel spokesman released on Sunday,
the Houthi group said the boats were carrying out “official duties protecting sea routes,” a rebel-owned news channel reported.




Escalation of conflict

Any escalation of conflict in this region will certainly increase the risk premium for Brent crude,”
Neil Beveridge, senior energy analyst at Bernstein, told CNBC. 

However, he pointed out that there will be no significant impact for now.

“We have never seen Iranian naval incursions before. And unless the situation gets worse,
I don’t see any significant impact at this level,” he added.

 

Sailing in the Red Sea stopped

 

The Houthi group is attacking ships in the Red Sea, targeting Israeli ships
and other vessels heading to or from Israel in retaliation for the country’s war in Gaza,
which has killed nearly 22,000 people there so far.

Major shipping companies stopped sailing via the Suez Canal and the Red Sea in early December,
opting instead to shift via South Africa –
a longer and more expensive journey with freight rates that could be as high as $10,000 per container.

 

Oil prices rise as Iranian warship enters Red Sea after US destroys Houthi boat