Hope for the best, but prepare for the worst. In regards to the conflict in Israel, analysts at JPMorgan said there had been no immediate impact on global oil production. A substantial surge in oil prices is not expected unless there is an escalation. However, a broadening of the conflict may lead to disruption in the Strait of Hormuz and supply could be hit if the US were to strictly enforce restrictions on Iranian oil exports. This could lead to a sharp increase in North Sea oil prices in the range of $100-120 per barrel.
According to the International Energy Agency, the current conflict and rising tensions across the Middle East are raising risks to the global oil market. Despite an increase in the forecast for global demand growth by 2.3 million barrels per day to a record 102.7 million bpd in 2023 and the assessment of global supply remaining at 101.6 million bpd, further military actions in the region could lead to supply cuts and rising Brent prices.
The risk of involving other countries and organizations is quite high. Iran claims that the Hezbollah group could launch a full scale offensive if Israel attacks Gaza. In such circumstances, visits by officials from the US and Germany, including US President Joe Biden, to Jerusalem appear logical. Western countries do not want to allow the Brent rally to continue and will do everything in their power to dissuade Israel from aggressive actions.
The combination of strong oil and the US dollar poses a threat to the global economy. Central banks may resume cycles of tightening monetary policy, and high debt rates force governments to spend more money on servicing that debt. In recent years, the USD index and oil have typically moved in the same direction. Has the US dollar become a commodity currency?
The Dynamics of the US Dollar and Oil
The oil market has seemingly forgotten about the threats of a recession in the US economy, stagflation in the eurozone, and the slow recovery of China. Its focus has shifted to the Middle East. Other events only cause short-term fluctuations in Brent prices. For instance, US crude-oil inventories increased by 10.2 million barrels, the highest since February, and it led to a temporary dip in major oil grades. However, this information quickly faded from investors’ memory.
The fact that the US is making every effort to stabilize the oil market is evident in the negotiations between the US administration and Venezuela. In 2019, sanctions were imposed on this country due to election fraud. Now, the United States is willing to consider easing them to increase oil supplies to the global market. However, there is an opinion that Venezuela may struggle to rapidly increase production due to low investments in the industry.
Technically, on the daily chart, Brent is trying to restore the uptrend. A rebound from the $89.25-$89.6 area or a breakthrough of resistance at $91.4-$91.6 should be used for forming long positions.
The material has been provided by InstaForex Company – www.instaforex.com
Hope for the best, but prepare for the worst. In regards to the conflict in Israel, analysts at JPMorgan said there had been no immediate impact on global oil production. A substantial surge in oil prices is not expected unless there is an escalation. However, a broadening of the conflict may lead to disruption in the Strait of Hormuz and supply could be hit if the US were to strictly enforce restrictions on Iranian oil exports. This could lead to a sharp increase in North Sea oil prices in the range of $100-120 per barrel.
According to the International Energy Agency, the current conflict and rising tensions across the Middle East are raising risks to the global oil market. Despite an increase in the forecast for global demand growth by 2.3 million barrels per day to a record 102.7 million bpd in 2023 and the assessment of global supply remaining at 101.6 million bpd, further military actions in the region could lead to supply cuts and rising Brent prices.
The risk of involving other countries and organizations is quite high. Iran claims that the Hezbollah group could launch a full scale offensive if Israel attacks Gaza. In such circumstances, visits by officials from the US and Germany, including US President Joe Biden, to Jerusalem appear logical. Western countries do not want to allow the Brent rally to continue and will do everything in their power to dissuade Israel from aggressive actions.
The combination of strong oil and the US dollar poses a threat to the global economy. Central banks may resume cycles of tightening monetary policy, and high debt rates force governments to spend more money on servicing that debt. In recent years, the USD index and oil have typically moved in the same direction. Has the US dollar become a commodity currency?
The Dynamics of the US Dollar and Oil
The oil market has seemingly forgotten about the threats of a recession in the US economy, stagflation in the eurozone, and the slow recovery of China. Its focus has shifted to the Middle East. Other events only cause short-term fluctuations in Brent prices. For instance, US crude-oil inventories increased by 10.2 million barrels, the highest since February, and it led to a temporary dip in major oil grades. However, this information quickly faded from investors’ memory.
The fact that the US is making every effort to stabilize the oil market is evident in the negotiations between the US administration and Venezuela. In 2019, sanctions were imposed on this country due to election fraud. Now, the United States is willing to consider easing them to increase oil supplies to the global market. However, there is an opinion that Venezuela may struggle to rapidly increase production due to low investments in the industry.
Technically, on the daily chart, Brent is trying to restore the uptrend. A rebound from the $89.25-$89.6 area or a breakthrough of resistance at $91.4-$91.6 should be used for forming long positions.
The material has been provided by InstaForex Company – www.instaforex.com
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