Qassim Suleimani, commander of Iran's Islamic Revolutionary Guard Corps \"Al-Quds Brigade,\" died in an attack carried out by U.S. forces on Wednesday. Analysts believe the incident highlights the risk that geopolitical tensions in the Middle East could hit international oil markets by 2020, with investors needing to prepare for more short-term significant volatility in oil prices.
Traders instinctively opted to take refuge on the news, with New York oil and Brent oil rising at one point in intraday trading by% and%, respectively, just a step away from the $70-per-barrel integer mark.
Matthew Bay, a senior global analyst at the U.S. firm Strasford, said the attack could provoke serious retaliation from Iranian and Iraqi domestic support for Iranian forces or damage to oil infrastructure in the Gulf and elsewhere in the Middle East.
In September, two Saudi Aramco oil installations were attacked by drones and sparked a fire. Yemen's Houthi forces announced the attack, but the United States accused Iran of being behind the attack, which Iran denies. The attack on oil facilities once led to a sharp reduction in Saudi crude daily production, triggering a surge in oil prices.
Amrita Sen, chief oil analyst at Energyline Consulting, said oil prices would rise by 3% or 4% as markets responded instinctively to concerns about what retaliatory measures Iran would take.
Barry Banister, executive director of Stevie Nicholas Inc., said yesterday that the oil market shock is one of the two biggest risks facing the U.S. economy in 2020, and that tensions in the Middle East could lead to a sharp increase in oil prices in the middle of the year.
Kevin Russell, chief investment officer at UBS O'Connor, a hedge fund owned by UBS, said the market should be prepared for a big change in oil prices that could take place.
Zheng Bin, a financial analyst at Xinhua, believes that the upward trend since October has dominated oil prices, and that the heightened geopolitical risk has undoubtedly further strengthened this direction. At the same time, plans to cut production in major oil-producing countries will start this month, which will also support higher oil prices.
However, some analysts believe geopolitical tensions are hard to keep oil prices high in the current pattern of supply and demand with abundant oil stocks and spare capacity.
UBS's global chief investment officer for wealth management, Mark Heifer, said on Wednesday that if the situation in the Middle East deteriorates and oil supplies are disrupted, it could send crude oil prices sharply higher, hitting economic and financial markets. However, the international oil market is full of capacity, and the Organization of Petroleum Exporting Countries (OPEC) and Russia have spare capacity. Moreover, an oversupply of 300,000 barrels per day (bpd) is projected for 2020, especially in the first half, as oil producing countries such as the United States and Norway grow.
While the current tensions in the Middle East are likely to give international oil prices a big risk premium, it is harder for Brent crude oil futures to stay above $70 a barrel in the first half of 2020, he said. Geopolitical events are inherently unpredictable, after a relatively short-lived impact on the broader market.
Amrita Sen believes it will take some time for Iran to retaliate, during which oil prices will return some gains. Unless there is a real supply disruption, the current oil price rise will not be sustained.