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A Potential War with Iran—and Other Geopolitical Events—Just Don’t Bounce Oil Prices Like They Used To
It’s been the steady drumbeat that has defined the oil market over the last two years. As tensions have mounted between Iran and the U.S., each development—from renewed sanctions to saber-rattling to the threat of outright war—has brought the question: how much are oil prices going to rise?
There are historical reasons for this: conflicts in the Middle East are associated with oil price increases. In the past, they have had such an effect—the lead-up to the 1990 Gulf War, in particular, sparked a prolonged rally—and day-to-day, price spikes are often used as a proxy for just how nervous investors are about global politics.
But if we take the last several days as a guide, convention certainly doesn’t match reality. While Brent crude initially spiked on Friday, following the U.S. killing of Iranian General Qassem Soleimani, by Wednesday the jump had evaporated.
Oil prices were back where they started—and oil analysts weren’t surprised.
The market now seems to be conditioned to start selling soon after a geopolitical price spike occurs, looking to cash in immediately, knowing the rally will be short-lived, said Eric Nuttall, a senior portfolio manager at Ninepoint Parners in Toronto.
After years of oversupply, particularly from the U.S. shale boom, geopolitical shocks just don’t result in persistent oil price pops like they used to.
Oil hits $70
On Monday, the price of Brent crude futures hit $70 per barrel, before settling at $68.91—the highest close in more than three months. But by market close on Wednesday, Brent had not only eliminated the initial rally following Soleimani’s death—which were already fairly modest, building on months of rising prices—but had slid some 4% on the day to end at a more than three-week low.
This may seem counter-intuitive. “Historically, every time you’ve had bombs flying in the Middle East there’s always been risks that something might hit oil infrastructure, because there’s so much of it there,” says Christopher Haines, a crude oil analyst at London consultancy Energy Aspects.
But there are relatively straightforward reasons behind oil’s tepid response. First, the attack on Soleimani didn’t have an immediate impact on the supply of oil—it just stoked fears that supply could be disrupted if the conflict escalated.
A perennial concern is that a conflict in the region could result in Iran closing off the Strait of Hormuz, the world’s most important oil chokepoint. The strait—which links the Persian Gulf and Asian markets, and through which an estimated 40% of the world’s crude passes every day—is bordered on one side by Oman and on the other by Iran.
Iran has pledged to close the strait in the past if war breaks out—and saber-rattling in and near the strait last year resulted in brief oil rallies. But there’s a good reason for Iran to not follow through. After the U.S. reimposed sanctions on Iran in 2018, economically crippling the country, one of the few remaining customers for Iranian oil has been China. How does Iranian oil get to China? Through the Strait of Hormuz. And, indeed, the waterway has stayed open during this week’s U.S.-Iran escalation.
But there’s a second factor at play here, too. “Right now, people think that we have an awful lot of oil available,” Haines said.
Oil overload
Texas’s shale boom has redrawn the oil map of the world: the U.S., far from being a massive importer of oil, is now a frequent exporter. In October, the last month numbers were available, crude exports from the country hit around 3.38 million barrels per day, according to the U.S. Energy Information Administration. That was a record—and a gain of 1.1 million barrels per day from just a year before.
According to the Joint Organizations Data Initiative, a project that tracks oil data, U.S. exports accounted for around 12% of total global exports that month—far short of Saudi Arabia’s nearly 27%, but a dramatic jump from nearly 0% a decade before.
That’s produced the general feeling that there is no end to the supply, and oil prices have little incentive to rise.
Strikes on Saudi Arabia
To get another sense of why the oil market does little more than shrug at the prospect of the outbreak of war in the Middle East, it’s helpful to look back to September 2019.
Then, drone attacks on an oil refinery and an oil field in Saudi Arabia produced what looked like a “worst case scenario:” the disruption of half of production in the world’s largest oil exporter, amounting to about 5% of the world’s supply. It was a genuine supply hit, during a time when the geopolitical mood was already shaky.
Oil prices acted accordingly, and spiked up to 20% in a single day, the largest one-day jump since the mid-1980s. But then something else happened: prices almost immediately started dropping. In just over two weeks, Brent not only erased that initial gain, but dropped further, taking more than 16% off its post-strike peak. Saudi Arabia had worked quickly to calm global markets and reassure buyers, but, still, the impact was striking—it was like the attacks had never happened at all.
“It’s incredible,” said Nuttall, reflecting on the drop. The belief that there is enough oil to soften any blow to supply has meant that it’s difficult for oil to hold higher, even with a massive shocks, he said. Even a few years ago, he said he could not imagine that happening.
Does that mean that a threat to supply will never again produce a long-term oil price pop?
No, but when it comes to disruptions with lasting effects, the biggest risks don’t necessarily lie in the Middle East anymore; they’re in Texas.
82 Comments on "A Potential War with Iran—and Other Geopolitical Events—Just Don’t Bounce Oil Prices Like They Used To"
JuanP is stupid on Sat, 11th Jan 2020 11:59 am
More from stupid:
Tha Board said JuanP is stupid…
The Board on Sat, 11th Jan 2020 12:01 pm
JuanP is stupid! Thanks For bringing that up lunatic and short guy..lol..probably with a small prick too
Davy on Sat, 11th Jan 2020 12:01 pm
JuanP is me cloggo.
stupid
JuanP on Sat, 11th Jan 2020 12:02 pm
I am Davy
I AM THE MOB on Sat, 11th Jan 2020 12:02 pm
Pete Buttigieg : “Trump’s Miltary Tit for Tat Game with Iran Caused Deaths of 176 Airline Passengers”
JuanP on Sat, 11th Jan 2020 12:03 pm
Go realgreenadaptation.blog
#experiencethetruth#
Davy on Sat, 11th Jan 2020 12:03 pm
Y’all no how triggered I am when I start talkin about penises.
I AM THE MOB on Sat, 11th Jan 2020 12:04 pm
Kids in cages ripped from their mothers (genocide). Now 176 innocent airline passengers murdered.
Trump is going full circle Hitler.
All cults usually end in tragedy. See Waco, Jim Jones, Manson family, etc.
Its just a matter of time before he self destructs.
Cloggie on Sat, 11th Jan 2020 12:04 pm
“How the UK killed Euroscepticism across Europe”
https://www.irishtimes.com/opinion/how-the-uk-killed-euroscepticism-across-europe-1.3910882
Reason: return to global prominence is within reach.
https://www.rt.com/news/387313-us-losing-leadership-eu-mogherini/
“‘US losing world leadership, Europe can replace it’ – EU top diplomat Mogherini”
JuanP on Sat, 11th Jan 2020 12:04 pm
When I talk about ebony cock means I am triggered
JuanP is stupid on Sat, 11th Jan 2020 12:05 pm
More stupid from stupid JuanP is REAL stupid stupid:
JuanP said Go…
JuanP on Sat, 11th Jan 2020 12:06 pm
“Kids in cages ripped from their mothers (genocide). Now 176 innocent airline passengers murdered.:”
You mean Obama right Mob? He started it
JuanP on Sat, 11th Jan 2020 12:07 pm
JuanP is stupid
More Davy ID Theft and Projections on Sat, 11th Jan 2020 12:07 pm
JuanP on Sat, 11th Jan 2020 12:04 pm
When I talk about ebony cock means I am triggered
JuanP ID theft on Sat, 11th Jan 2020 12:08 pm
More Davy ID Theft and Projections on Sat, 11th Jan 2020 12:07 pm
JuanP on Sat, 11th Jan 2020 12:04 pm
When I talk about ebony cock means I am triggered
Cloggie on Sat, 11th Jan 2020 12:08 pm
“Trump is going full circle Hitler.”
You think so? That’s terrible mobby, especially for you!
Look at me, I’m a train on a track
I’m a train, I’m a train
I’m a chook-a train, yeah
Look at me, gotta load on my back
I’m a train, I’m a train
I’m a chook-a train, yeah
Look at me, I’m going somewhere [*]
I’m a train, I’m a train
I’m a chook-a train, yeah
[*] – hint: to the East
I AM THE MOB on Sat, 11th Jan 2020 12:09 pm
“You mean Obama right Mob? He started it”
That’s right Davy.
More JuanP ID Theft and Projections on Sat, 11th Jan 2020 12:09 pm
More Davy ID Theft and Projections on Sat, 11th Jan 2020 12:07 pm
JuanP on Sat, 11th Jan 2020 12:04 pm
When I talk about ebony cock means I am triggered
JuanP ID theft on Sat, 11th Jan 2020 12:08 pm
More Davy ID Theft and Projections on Sat, 11th Jan 2020 12:07 pm
JuanP on Sat, 11th Jan 2020 12:04 pm
When I talk about ebony cock means I am triggered
I AM THE MOB on Sat, 11th Jan 2020 12:10 pm
“You mean Obama right Mob? He started it”
That’s right Juan.
The Board on Sat, 11th Jan 2020 12:10 pm
Would everyone PLEASE.
Stop feeding the davy troll
The Board on Sat, 11th Jan 2020 12:12 pm
Would everyone PLEASE.
Stop feeding the juanPee lunatic
Go realgreenadaptation.blog #experiencethetruth#
I AM THE MOB on Sat, 11th Jan 2020 12:14 pm
Polish PM calls for stronger US-EU ties, criticizes ‘anti-Americanism’
https://www.politico.eu/article/polish-pm-mateusz-morawiecki-calls-for-stronger-us-eu-ties-criticizes-anti-americanism/
That’s a good boy!
The Board on Sat, 11th Jan 2020 12:19 pm
Everyone knows that JuanP is one of your sock puppets Davy.
The Board on Sat, 11th Jan 2020 12:25 pm
It is great seeing Th troll JuanP tormented with his own
medicine. LMFAO
Go realgreenadaptation.blog
I AM THE MOB on Sat, 11th Jan 2020 12:40 pm
Juan, stop the silliness.
Cloggie on Sat, 11th Jan 2020 12:48 pm
Polish PM calls for stronger US-EU ties, criticizes ‘anti-Americanism’
https://www.politico.eu/article/polish-pm-mateusz-morawiecki-calls-for-stronger-us-eu-ties-criticizes-anti-americanism/
That’s a good boy!
Yes, Poland is very much pro-EU, but also anti-Russia. Perhaps you can use them again as your useful idiot.
https://www.telegraph.co.uk/news/worldnews/europe/russia/5445161/Russia-accuses-Poland-of-starting-Second-World-War.html
“Russia accuses Poland of starting Second World War”
Fortunately there is no longer a German-minority in Poland anymore, the US can sick the Polish government against.
Gotta think of something else. Hurry up before your rubes at home begin to revolt!
https://www.youtube.com/watch?v=0SmVdbxEoGs
Cloggie on Sat, 11th Jan 2020 12:53 pm
“‘Meghan Markle’s just not that into Britain’: Royal commentators say Duchess has fallen out of love with UK… but warn celebrity Sussexes will end up ‘bigger than the Queen'”
https://www.dailymail.co.uk/news/article-7876065/Royal-commentators-say-Duchess-fallen-love-UK.html
Obviously this doesn’t count as “racism”. There is no such thing as black racism, everybody knows that.
Now white racism is a different matter altogether, if we are to believe the “American” press:
https://edition.cnn.com/2020/01/10/entertainment/meghan-markle-blame-all-sides-race-trnd/index.html
“Coming or going, Meghan gets the blame — and it’s because of her race”
Poor Harry. Fell for the classic, manipulative femme fatale. Should have listened to William and Charles… but obviously didn’t.
Somehow I feel another royal drama coming up of the Diana caliber.
Perhaps Elton John can already prepare for the song.
JuanP on Sat, 11th Jan 2020 1:54 pm
“Juan, stop the silliness.”
I can’t help myself.
Go REAL Green
realgreenadaptation.blog
#experiencethetruth#
The Board on Sat, 11th Jan 2020 3:35 pm
Good boy Juan! There is hope for you.
Go REAL Green
realgreenadaptation.blog
#experiencethetruth#
I AM THE MOB on Sat, 11th Jan 2020 10:26 pm
New York Mayor de Blasio referred Trump Organization information to district attorney because of possible crime
https://www.cnbc.com/2020/01/10/de-blasio-gave-trump-statements-to-prosecutors-due-to-possible-crime.html
It’s Mueller Time!!!
supremacist muzzie jerk hardware may i help you yes uh buttplug ah what is it a spark plug you talking about just a minute yes sir may i help you buttplug BUTTPLUG BUTTPLUGGA BUTTPLUG sorry sir we don't have that buttplug THANK YOU on Sat, 11th Jan 2020 10:49 pm
MOB muzzie in nyc had a feud with the bloods.
muzzie in nyc was raid by the fbi in a compound in new mexico you remember?
we kill muzies left and right in iraq but at home muzzies are free to run wild
muzzie akbar sayeed used low english on whitey supertard john brady and he committed suicide. muzzie akbar sayeed is a paki muzzie but to show devotion was named as sayeed the same tribe muzie muhamad the pedo came frome. arab muzzies are supreme all other muzzies are second class and us infidels are on the bottom. “allah made muzze the best of humanity, infidels are animals”.
muzzie akbar sayeed is pioneer for introducing low english into western higher education institutions.
higher ed is infested with muzzies because muzzie in indonesia occupied higher ed in indonesia then occupied higher ed in western countries.
the next 911 will be conducted by muzzies from indonesia. 9/11 was conducted by ME muzzies with PhD’s educated in western higher ed institutions
supremacist muzzie jerk hardware may i help you yes uh buttplug ah what is it a spark plug you talking about just a minute yes sir may i help you buttplug BUTTPLUG BUTTPLUGGA BUTTPLUG sorry sir we don't have that buttplug THANK YOU on Sat, 11th Jan 2020 11:07 pm
/watch?v=NLSsfhFbxNA
MOB watch video of andalusia by muzzie akbar ahmed who dreams of setting it up in europe.
video is by supertard big muzie beard.
the myth of muzzie andalusia is sorta like the englighment or golden age of muzzies which is non existence
like how muzzies palestineans are non existence.