Geopolitical Risk and Chinese Demand Could Boost Oil Prices - OilPrice.com
Geopolitical Risk and Chinese Demand Could Boost Oil Prices | OilPrice.com
Geopolitical Risk and Chinese Demand Could Boost Oil Prices
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Bullishness is returning to the oil industry, with prices set to go considerably higher in case the conflict in the Middle East escalates, RBC’s Helima Croft told Bloomberg in an interview.
The commodity analyst noted the resilience of oil demand in China as another important factor for prices, saying that while the macro picture of the Chinese economy might suggest weak demand, actual demand has actually held up pretty well.
Regarding the situation in the Middle East, the biggest question remains whether Iran will become directly involved in the fighting, which would likely prompt a surge in oil prices.
Croft noted a recent expansion of Israeli activity to Lebanon, noting that if the Israelis target the country in a more concerted way, Iran may view this as crossing a red line that would get it involved in the war.
This then could lead to attacks on energy infrastructure by Iran itself or the Houthis in Yemen, the RBC commodity expert said.
Meanwhile, oil prices declined on Monday following an initial spike after OPEC+ said it had agreed to extend its production cuts for another quarter. The move was expected, which is why its effect on prices was moderate.
"With OPEC loadings appearing steady and aggregate OPEC supply potentially showing little effect from incremental voluntary cuts implemented in Q1, we do not view the extensions from the broader group as particularly impactful," Macquarie energy strategist Walt Chancellor told Reuters.
But it was demand worry that pressured prices by the end of trade on the first day of the week, Reuters reported Monday, citing John Kilduff from Again Capital as saying "We would have needed sustained heating oil demand to keep the complex up."
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Another bearish factor for oil is the possibility of a ceasefire between Israel and Hamas, which is currently being discussed.
By Charles Kennedy for Oilprice.com
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Related Knowledge Center: ENERGY BASICS: petroleum
While electric-powered vehicles may be the ride of the future, oil remains at least for now the dominant fuel for transportation around the world. And after a period of time at the end of the 20th century when oil was subject to wide fluctuations in price, new supplies in North America as a result of non-conventional recovery techniques have helped stabilize prices.