Oil at the highest level of the last five and a half months. And, although there have been some profit-taking, the prospect is certainly not that of a significant decline. “We are at the dawn of a new crisis in the raw materials sector” he explains Gianclaudio Torlizzifounder of the first independent commodity consultancy firm, T-Commodityas well as consultant to the Ministries of Defense and Business and of Made in Italy for the analysis of commodity flows.
From his point of view, the worst of the matter lies in the fact that the Union is doing nothing to remedy the situation. Indeed, he insists on a green deal which will end up creating further pressure on raw material prices.
Skyrocketing prices
The geopolitical risk following Iran’s drone attack on Israel caused crude oil prices to skyrocket. The prices rose to highs of 92 dollars a barreland then fall back on diplomatic signals aimed at lowering the tone between the parties involved.
North Sea Brent futures for June delivery hit a high of $92.12 a barrel over the weekend, before retracing to $89.80. Similarly, the May contract on American Light Crude (WTI quality) reached a peak of $87.54 per barrel, before falling back to $84.97.
The crisis in the Middle East dominates the scene
The situation is very tense and risks worsening. In fact, if Iran were to also have production problems, prices would be significantly affected. The increases recorded so far have discounted the Houthi attacks on oil tankers in the Red Sea and the damage to Russian oil infrastructure. Added to this is the fact that OPEC Plus has decided to continue the cuts plan to the offer started a year ago.
On the other hand, in the event of a supply shock, the United States they can rely on their strategic reserves. And also l’OPEC has at least 5 million remaining capacity unused, largely in the hands of Riyadh.
Iran has a strategic role
The country is OPEC’s third largest producer. Out of overall production of 26.6 million barrels per day as of March 2024, Iran contributed nearly 3.2 million barrels, after Iraq (4.2 million barrels per day) and Saudi Arabia (9 million).
Tehran wanted and promoted a restrictive supply policy to avoid excessive price fluctuations. The strategy was shared within the OPEC Plus cartel of which Russia is also part.
Demand for crude oil expected to increase
Despite what supporters of the green deal say, demand for hydrocarbons is far from decreasing. This year, experts expect growth in demand for up to 2.2 million barrelsin response to the recovery of the economy, indicated at 2.8-2.9%.
Fueling demand is the growth of United States that However, it risks being influenced by the Fed which intends to postpone the rate cut. The role of the‘Europa which however could start again in the second half of the year with a more accommodating policy on interest rates in the month of June. As for the Chinesethe large Asian economy now seems to be on the road to economic recovery.
Experts’ predictions
“If prices were to rise significantly in the wake of supply losses, one could imagine the producer group looking to utilize some of the spare capacity in the market. OPEC will not want to see prices rise too much given the risk of demand shocks,” he points out INGwhich confirms a price prediction of Brent at 87 dollars.
Per Saxo it is probable that the involvement of theIran “still pushes crude oil prices higher”but the recent rally could deflate “if further escalation is avoided.”
Finally, the analysts of Citicurrent prices between 85 and 90 dollars are the result of prolonged tensions in the Middle East, which a de-escalation could bring it back to 70 dollarswhile in the event of an increase in tensions, prices could skyrocket up to 100 dollars a barrel.
(Teleborsa)