Oil Reacts to Developments in Middle East
by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
In a statement sent to Rigzone today, George Khoury, the Global Head of Education and Research at CFI, highlighted that the oil market reacted to developments in the Middle East and warned that “risks of a broader conflict seem to be increasing”.
“This threatens to disrupt oil supplies and supply routes and could lead to higher prices still,” Khoury said.
“The recent increase in the crude oil price premium reflects the market’s worries that Iran might become more directly involved in the conflict, potentially threatening the Strait of Hormuz, a key route for global oil transport,” he added.
“Additionally, the decline of crude oil stockpiles in the U.S. also contributed to support oil prices as traders hope for a stronger demand in the United States,” he continued.
Khoury noted in the statement that crude markets could also benefit from softer monetary policies in the U.S. and elsewhere in the coming months.
“Lower interest rates could help support major economies and push oil demand to the upside. However, the trend of oil prices could depend on the pace of economic growth in China which has been slowing more than expected,” he added.
In a research note sent to Rigzone today by the JPM Commodities Research team, J.P. Morgan analysts said “oil prices recouped some of the losses on Wednesday, as the killing of a Hamas leader in Iran ratcheted up tensions in the Middle East, but remain at the lowest level since the beginning of June amid market uncertainty around the changing U.S. election narrative and broader macro risk off”.
“Physical indicators are also reflecting some deterioration in the fundamentals. The backwardation in the Brent and WTI structures softened in recent sessions, with key timespreads across all tenors the weakest since early-to-mid June. Regional crude prices and differentials have also eased,” the analysts added.
In the note, the J.P. Morgan analysts warned that the market remains volatile.
“Brent oil was trading below $80 in early June, rose to almost $90 in early July, before falling to the high $70s on July 30,” they pointed out.
“Amid this volatility in spot prices, our fair value model remains remarkably stable. The pricing model continues to project Brent’s July’s fair value at $84 (it realized $83.88), and that the price in September would hover at close to $90,” they added.
“For the year, the model still shows that Brent would average $83 per barrel (year to date Brent traded at $83.49), and places December 2025 at $63 (published price $64). This stability is even more remarkable, given that our price forecast has not changed since June 2023,” they continued.
The analysts warned in the report that the main hurdle to $90 “remains the misplaced (in our view) doubts about the health of global demand and market’s fixation on a fundamentally weak 2H25”.
“Furthermore, the most important market consequence of a U.S. election that has become more competitive, is a big increase in uncertainty around the outcome,” they added.
“A victory by the incumbent Democratic party is the most market-neutral scenario, while implications of another Trump presidency could be net bearish for oil as the return of a ‘maximum pressure’ campaign on Iran is ultimately undercut by the negative macro impacts of rising trade tariffs,” they continued.
“Consequently, sequencing of policy priorities would become much more important under a Trump 2.0,” they went on to state.
The price of Brent rose from a close of $78.63 per barrel on July 30 to $80.72 per barrel on July 31. At the time of writing, Brent is trading at $80.65 per barrel.
by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas