Adedapo Adesanya
By Adedapo Adesanya
The gains posted by crude oil on Monday morning amid escalating tensions in the Middle East moderated later in the night prices on the back of increased output from non members of the Organisation of the Petroleum Exporting Countries (OPEC).
Members of the oil cartel had agreed to reduce the volume of crude oil supplied to the international market so as to keep prices high, but yesterday, non-OPEC members flooded the market with oil due to rise in prices as a result of killing of a Iranian military chief by a United States drone.
Earlier on Monday, Business Post had reported that the Brent crude briefly rose to about $70.70 per barrel, its highest price since September, while the West Texas Intermediate (WTI) traded at its highest since April to $64 per barrel.
However, at the Monday night session, things waned as the Brent Crude slowed to $69.05 per barrel while WTI traded at $63.21 per barrel.
Oil had hit its highest levels following the killing of Mr Qassem Soleimani, the Iranian general who heads the Iranian Revolutionary Guards’ Quds force by the US military and the oil market reacted by rising in a way which had not been like this since the attacks on Saudi Arabia’s oil facilities in September 2019.
Tensions have since been building between the United States and Iran with fears of conflict in the Middle East increased especially with Iran announcing its intention to leave the 2015 Nuclear Deal.
Despite a rise of 4 percent resulting from this, the oil market could not hold much to the gains as it was pressured by stiff competition from rise in production from the non-OPEC producers such as US, Norway, and other countries which also threatens to offset moderate demand to supply.
Also, Iran’s promise of a retaliation haven’t moved investors as all efforts to make a statement don’t amount to cause a major upset may move oil prices up. For instance, analysts noted that if they attack major production facilities either in Saudi Arabia or Iraq — OPEC’s two largest producers, this might drive prices up.
However, necessary consideration that support oil include the OPEC+ announcement to deepen production cuts to 1.7 million barrels per day in December and also the ease to trade tensions between the United States and China has led to a better outlook for demand recently.
