Oil prices fell below $100 a barrel on Monday and closed 7% down, only to climb more than 2% on Tuesday
Oil prices rebounded on Tuesday after sliding sharply a day earlier, underscoring the volatility gripping crude markets as investors weighed the US military strikes in southern Iran against signs that diplomatic efforts may still be advancing.
Brent, the benchmark for two thirds of the world’s oil, was up 2.35 per cent to $98.40 a barrel at 10.07am UAE time. West Texas Intermediate, the gauge that tracks US crude, climbed towards $92 a barrel, recovering from a steep drop of more than 6 per cent in a singular session.
Brent oil price in the past year
Average weekly price in US dollars. Shaded area is the range between the maximum and minimum prices
The recent volatility in prices has divided analysts over whether the price of crude could stage another sharp rally or ease as diplomatic efforts gain traction.
Ipek Ozkardeskaya, senior analyst at Swissquote, said the price could surge sharply if tensions persist and disruption of shipping routes goes on.
“Given the track record of negotiations through this conflict, I would say that a return above the $100 per barrel is possible if the peace talks don’t evolve towards the right direction, and traffic in the Strait of Hormuz is not quickly restored,” she told The National.
She added that every additional day is pushing the physical market towards “pain levels” not yet reported in the current conflict.
However, while volatility is rising, prices “above $120 per barrel could trigger demand destruction” and limit a sustainable spike above these levels, Ms Ozkardeskaya said.
Vandana Hari, chief executive of Singapore-based Vanda Insights, is more cautious and expects the latest gains in crude prices to be temporary. “I don’t see prices rising much beyond current levels,” she told The National.
She said her firm has shifted its outlook towards a higher probability of a preliminary agreement. “We have shifted our deal-versus-escalation odds from 50:50 to 70:30 in favour of a preliminary agreement,” she said.
