Analysts now think crude market will be bearish in 2020: File Image/PixaBay
With reports on Wednesday that Iran's missile attack on U.S. forces in Iraq was an all-out bust and possibly even intended simply to save face, crude's brief rally ended almost as quickly as hostilities between the two nations flared up - with oil falling more than 4 percent.
Brent plummeted $2.83, or 4.2 percent, to settle at $65.44 per barrel, while West Texas Intermediate fell $3.09, or 4.9 percent, to settle at $59.61 per barrel.
The analytical community, which as late as Tuesday evening insisted that the U.S./Iran hostilities would ensure elevated prices for crude well into the New Year, are now of the mind that 2020 could wind up being bearish for the commodity.
Mohammad Javad Zarif, foreign minister for Iran
We do not seek escalation or war
They focused on the Energy Information Administration's latest report to support their new-found contention: the EIA on Wednesday revealed that crude inventories rose 1.2 million barrels last week, compared to expectations of a 2.6 million-barrel decrease and preliminary industry data showing a 5.9 million barrel decline.
Matt Smith, director of commodity research at ClipperData, remarked, "A triumvirate of bearish builds in the weekly EIA reports is adding momentum to crude's overnight price reversal as fears of escalating tension are unwound."
Wednesday's spectacular price losses for crude would presumably further frustrate Iran, whose oil minister, Bijan Zanganeh, stated before the session's settlement that "The trend of oil prices is up and this benefits Iran ... Americans should stop disturbing the region and let the people of the region live."
By contrast, Wednesday's losses should possibly relieve investors who worried that the U.S./Iran conflict would lead to U.S. corporate earnings being crimped by rising energy costs.
John LaForge, head of real asset strategy for Wells Fargo Investment Institute, said, "Oil is still not prohibitively expensive, but it's significantly more expensive than it was when companies were making their budgets a year ago.
"They might have the ability to pass it on or they might not, but overall there is going to be a hit to margins."
As of Wednesday evening, western media reported that Iran was believed to be telling militias not to attack U.S. targets: Mohammad Javad Zarif, foreign minister for the Islamic republic, tweeted that the attacks earlier this week were "proportionate measures in self defence," and that "We do not seek escalation or war, but will defend ourselves against any aggression."