Monday, January 20, 2020

Summing up the geopolitics heavy last 4 weeks!

The end of the previous trading year and the start of the new one is usually a slow burner for crude  oil traders. However, the four or so weeks from Christmas Eve of 2019 all the way up to what's fast approaching late January of 2020, have turned out to be anything but!

As it transpired, skirmishes in Iraq between Iran-backed militia and US forces heightened Middle East tensions over Christmas. What then followed took the market by surprise. In the small hours of January 2, the New Year got its first geopolitical jolt, after a US airstrike killed Qasem Soleimani, an IranianGeneral of the country's Islamic Revolutionary Guard Corps, and commander of its Quds Force, a division primarily responsible for extraterritorial military and clandestine operations.

In the Oilholic's opinion, courtesy US President Donald Trump, it was the biggest targeted political killing in the region since that of another Iranian protégé - Lebanese Islamic Jihad Organization's founder and then Hezbollah's second-in-command ImadMughniyeh in 2008; a man widely thought to have masterminded the 1983 US embassy bombing in Beirut.

As speculators piled into the oil futures market with long calls, expecting the inevitable Iranian response, Tehran duly obliged via missile strikes on Iraqi bases housing US troops that it gave prior warning of and the attack caused no casualties. However, as has now been acknowledged, the Iranians mistakenly shot down a civilian airliner tragically killing 176 innocent people on board.

The phoney oil price rally also came and went as soon as Iran's phoney response to the US airstrike became evident. While there is no shortage of speculators, ample supplies in a crude market that has gotten used to living with a Middle East in flames has tempered any rash calls to the upside since.

Rising woes in Libya, Turkey's entry into an already messy civil war that's reached the gates of Tripoli and a subsequent force majeure of the country's oil exports that has followed in recent days, after the US-Iran episode, also offers such a case in point. The market is coping and the oil price is going to be kept honest courtesy ample supplies, especially of light sweet crude oil, as the Oilholic opined in a recent Rigzone column.

All things considered, 2020 could see Brent lurk in the $70-75 range, while the WTI could oscillate between $63 and $68, as yours truly noted, even if recent events have surely made for a very hectic four weeks for oil market observers. Let's leave it at that for now.

Away from all this, the Oilholic also had the pleasure of listing to Royal Dutch Shell's electric car driving Chief Financial Officer Jessica Uhl at a Reuters Breaking Views event in London on January 16. The oil giant's finance boss offered up some choice quotes on the evening, few of which are embedded here via yours truly's Twitter feed below (@The_Oilholic).
And that’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2020. Photo: Oil pipeline © Cairn. 

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