Traders Are Concerned with Potential Israeli Response to Iranian Attack
April 16, 2024
Energy prices were lower in yesterday’s trading as Israel’s defense system performed very well against Iran missile and drone attack. Since there was no reported damage to energy infrastructure some of the risk premium came out of the market. Traders are still concerned about what Israel’s response will be and there is still a lot of uncertainty in the Middle East for the market to watch.
Better than expected growth in China’s economy during the first quarter was not a positive for the hope that central banks will lower interest rates. China economy grew at 5.3% a number better than the expectations. US retail sales for March came in better than expected, also not a positive for lower interest rates.
Citi said its base case scenario sees tensions remaining extremely high in the Middle East region underpinning elevated oil prices, with its 0-3 month point price of $88 per barrel and its second quarter average price of $86 per barrel. Its new 0–3-month price target is $83 per barrel from the previous $75 per barrel. It said there is “a potential continuation of a direct conflict between Iran and Israel, which it estimates could see oil prices trade up to $100 per barrel depending upon the nature of the events.” It said it believes prolonged tensions through the second quarter are now largely priced at $85-$90 per barrel, while a de-escalation in tensions could see oil prices falling back quite sharply to the high $70s to low $80s per barrel.
Société Générale said the geopolitical risk is likely to become embedded in crude prices for the foreseeable future. It raised its Brent forecast to $91 per barrel in the second quarter and WTI to $87 .50 per barrel and expects Brent to average $86.80 and WTI $83.30 per barrel in 2024.
The EIA said US oil output from top shale-producing regions will increase in May to the highest level in five months.
US motorists returned to the road in February, with the number of vehicle miles traveled during the month rising once again when compared to last year after seeing a decline in January, according to the Federal Highway Administration. Motorists are estimated to have traveled a total of 240.244 billion miles during the month, about 4.8 billion more than during the same time last year.