The oil market hive mind in "wait and see" mode
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The oil price surge that followed Hamas' attack on Israel has paused for the moment, suggesting markets don't see the conflict immediately spreading or reaching key producing areas.
State of play: Crude remains well off the 2023 highs reached in late September despite the jump when markets opened Sunday.
Why it matters: The price of oil ripples throughout economies. Price movements are also the function of a hive mind assessing variables and evolving info, just like everyone else.
What they're saying: "For oil, we would likely need to see confirmation of Iran's involvement in order to give the market another significant push higher," ING analysts Warren Patterson and Ewa Manthey said in a note.
- "[T]his would provide another boost to prices, as we would expect to see the U.S. enforcing oil sanctions against Iran more strictly," they said.
- "No direct oil supplies are impacted by the conflict at the moment so it's a wait-and-see situation," Again Capital LLC partner John Kilduff tells Reuters.
Yes, but: Oil isn't the only commodity affected. Israel ordered the shutdown of the Chevron-operated Tamar natural gas field off its coast in the Mediterranean Sea.
- That helped fuel a sharp rise of nearly 30% this week in European gas prices — the field supplies Israel but also exports to Egypt, which in turn exports some as liquefied natural gas (LNG).
Threat level: Goldman Sachs analysts wrote in a note that curtailment only tightens global gas balances "at the margins" for now.
- But they add: "Going forward, given the uncertainly around the duration of this gas production disruption, as well as with added uncertainty regarding the geopolitical ramifications of the ongoing conflict, we see risks to European gas prices skewed to the upside."
- S&P Global Commodity Insights has more.
