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Today's markets analysis on behalf of Paolo Broccardo, CEO at BankPro '
(MENAFN- Your Mind Media ) Oil prices rose for another session on Tuesday, reaching 3-month highs as escalating tensions across the Gulf renewed concerns over regional energy flows. The latest incidents affected several energy facilities in Saudi Arabia, reviving production capacity disruption risks. The deteriorating security landscape could hinder efforts to return energy exports to normal levels. At the same time, ongoing disruptions in the Strait of Hormuz continue to reinforce the bullish backdrop for crude prices, with fewer cargoes leaving the region, according to Reuters.
Nevertheless, efforts to sustain tanker crossings through the waterway despite the current restrictions and security risks, in addition to exports through alternative routes, could help limit the extent of the rise in oil prices. What is more, measures to support the oil market are gradually running out of steam due to falling consumption, as seen in China in recent months, and the sale of reserves, as the US is actively doing.
Another factor driving up energy prices is the heightened focus on the EU gas market, which, with no prospect of a stabilisation in supplies from the Middle East, is filling its gas storage facilities ahead of winter at the highest prices seen in the last four years, having fallen furthest behind the norm in recent years.
Looking ahead, crude prices are likely to remain highly sensitive to geopolitical developments and shipping conditions in the Straits of Hormuz and Bab El-Mandeb. Markets will also monitor Washing’on’s reaction to an agreement between Iran and Oman over the management of the waterway. Any improvement in transit conditions could ease supply concerns and weigh on prices, while a hardened stance or further restrictions would tighten the physical market and renew upward pressure on crude.
Nevertheless, efforts to sustain tanker crossings through the waterway despite the current restrictions and security risks, in addition to exports through alternative routes, could help limit the extent of the rise in oil prices. What is more, measures to support the oil market are gradually running out of steam due to falling consumption, as seen in China in recent months, and the sale of reserves, as the US is actively doing.
Another factor driving up energy prices is the heightened focus on the EU gas market, which, with no prospect of a stabilisation in supplies from the Middle East, is filling its gas storage facilities ahead of winter at the highest prices seen in the last four years, having fallen furthest behind the norm in recent years.
Looking ahead, crude prices are likely to remain highly sensitive to geopolitical developments and shipping conditions in the Straits of Hormuz and Bab El-Mandeb. Markets will also monitor Washing’on’s reaction to an agreement between Iran and Oman over the management of the waterway. Any improvement in transit conditions could ease supply concerns and weigh on prices, while a hardened stance or further restrictions would tighten the physical market and renew upward pressure on crude.
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