Sentiments and forecasts change overnight for crude oil; prices have been on a roller coaster ride lately as bulls and bears keep switching turns rather quickly. From bullish sentiments to bearish forecasts to bulls again taking the lead, crude oil prices are the in limelight once again.
As mostly, geopolitical tensions have escalated prices in recent days as Tehran and Washington edged closer to war. The prices soared more than five percent after Iran shot down a US military drone last week. Brent crude oil increased by $2.63 a barrel - 4.3 percent hike – to $64.45 a barrel, while US West Texas Intermediate (WTI) crude rose by $2.89 to $56.65 a barrel – or 5.4 percent. Though President Trump called off a retaliatory attack on Iran, the tension between the two countries is not where close to being over yet.
Since this space last covered oil prices (Read: Oil prices toppling?), geopolitical tension in the Middle East has escalated primarily because of the two attacks near the strategic Strait of Hormuz. And since May 2019, there have been 6 oil tanker attacks near or in Strait of Hormuz, not only signifying the importance of the corridor, but also escalating the wrath between US and Iran where the former blames the latter for the attacks.
At the same time, a potential interest rate cut by US Federal Reserve is also on the cards given the economic situation, which will push commodity prices up including that of crude oil.
While the tension between US and Iran is one factor driving up oil prices, there are two factors going forward that will determine what route oil prices take as the second half of 2019 begins. These two factors are actually upcoming events. One is the upcoming G20 Conference where chances of US and Chinese presidents meeting cannot be warded off. Any breakthrough between the two countries will send oil prices through the roof – though chances are not very sanguine.
The second – and a much relevant event is the upcoming OPEC+ meeting that has recently agreed to convene in early July 2019 in Vienna. This event is more predictable than the aforementioned G20 conference as it’s much likely that the OPEC+ will continue to stick with production cuts through the end of the year against the plunge in prices before the whole US-Iran drama escalated.
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