Oil Prices Squeezed Between Peace Hopes and Iran Escalation Risk

Résumé détaillé

Oil prices have crashed about 20% from the late-October peak of $118 per barrel, weighed down by hopes of sustainable de-escalation in the Middle East and the Russia-Ukraine war.…

What I Cover Tsvetana Paraskova is an energy and commodities journalist who has contributed to Oilprice.com for nearly a decade, covering global energy markets, commodities,…

Oil prices have crashed about 20% from the late-October peak of $118 per barrel, weighed down by hopes of sustainable de-escalation in the Middle East and the Russia-Ukraine war.

For months, traders and hedge funds have often bet on a resolution of the conflicts, only to reactivate buying when talks fall apart.

As U.S.-mediated talks between Ukraine and Russia are underway, there are no signs of a breakthrough in either the conflict in Europe or the U.S.-Iran standoff, despite messaging via Qatar.

Oil prices have slipped as crude oil flows from the Strait of Hormuz and the entire Middle Eastern region have rebounded in recent weeks to nearly pre-war levels.

But Brent at about $94 a barrel on Thursday, after briefly slipping below $90 on Wednesday, could be very close to a floor under oil prices if the Middle East remains the gray area of ‘no deal but no escalation either’ for months.

As long as the stalemate persists, risks to shipping will remain elevated and insurance premiums will stay high, adding sharply to the cost of each barrel of crude oil that is able to leave the Strait of Hormuz.

Middle Eastern benchmarks have been weakening for weeks, suggesting an oil glut may be building amid rebounding Persian Gulf exports and global demand destruction amid high prices.

But the costs to refiners and consumers are not falling. War, insurance premiums, and record tanker rates pushed the cost of shipping a barrel of crude from the Middle East Gulf to Asia on a large tanker to more than $37 by mid-October, more than five times the pre-war level, according to the International Energy Agency.

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