Analysts agree prices will escalate in 2020 - but not for long: File Image/PixaBay
Although it was widely predicted that Iran would confine its retaliation for the death of its Quds Force leader Qassem Soleimani to U.S.-led forces in Iraq, news of the attacks on Tuesday was enough to cause crude prices to spiral upwards again.
As reports filtered in on at least one quarter of a dozen ballistic missiles aimed at two Iraqi military bases failing to meet their targets, Brent rose $1.56, or 2.3 percent, to $69.83; West Texas Intermediate climbed $1.25, or 2 percent, to $63.95 per barrel.
Hideshi Matsunaga, analyst at Sunward Trading, remarked, "It's getting really serious ... but there is a feeling of achievement in terms of technical charts as Brent has surged to above $70/barrel and near a high in September, 2019 after attacks on Saudi Arabian oil sites.
Tom Kloza, Oil Price Information Service
It doesn't take much to spook Americans into not driving
"We have to see how much and what damage the latest attacks have caused, but oil markets may come down, just like last September, if we can confirm that oil facilities have not been affected."
Jonathan Hoffman, spokesman for the Pentagon, would only say that "We are working on initial battle damage assessments"; for his part, U.S. president Donald Trump announced late Tuesday evening that "All is well."
Many analysts nonetheless braced for the worst: Eurasia Group stated in a note, "While an intensification to all-out war is unlikely, further lethal action between U.S. and Iranian forces and attacks against energy infrastructure are probable and will keep markets on edge."
The political risk consultancy added that its base case oil price for 2020 is a range of $65 to $75 per barrel, "with risks to the upside."
Tom Kloza, global energy analyst for the Oil Price Information Service, agreed that "We're in the seventh or eighth inning of a rally that's sustainable," but he went on to point out that "I'm pretty confident that we're going to exit the year at a much lower number."
Kloza also suggested that the tendency for people in the west to frighten easily may be the biggest problem of the current skirmish: "I'm a little bit more worried about if there are soft targets or targets that have to do with transportation.....it doesn't take much to spook Americans into not driving; it doesn't take much to spook the Western world or even emerging markets to lay off of the transportation."
Meanwhile, Lee Tillman, chairman and CEO of Marathon Oil, credited the lack of a stronger initial crude price reaction on Tuesday to the U.S.: "We make up about 8 percent of the global supply today, and those are reliable, highly secure barrels that the market is counting on, and I do believe that's reduced this risk premium from returning back into the market."