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Oil Falls to the Lowest in Over a Month as Gulf Tensions Recede


By Sheela Tobben

(Bloomberg) Oil settled at the lowest level since early December as geopolitical tension in the Middle East eased.Futures in New York fell 1.6% Monday. The threat of an outright war has receded since Tehran fired missiles at U.S.-Iraqi bases last week in retaliation for Washington’s assassination of its top general. In Libya, warring factions have called a cease-fire in their nine-month conflict. But the situation in Iran remains volatile amid protests against the government’s accidental downing of a commercial airliner.“There is a continuing sense that the geopolitical risk from Iran has come down dramatically,” said Phil Flynn, a senior market analyst at Price Futures Group Inc. “There is reduced risk to supply and that’s weighing on market sentiment.”

Easing Mideast tensions weakens U.S. oil futures prices

The lack of a geopolitical risk premium is partly due to plentiful supplies of U.S. shale and a torrent of new crude from non-OPEC countries including Brazil, Guyana and Norway. On the demand side, the U.S. and China are set to sign their limited trade deal this week, which may improve sentiment.

“We are now rolling into a period with a softer fundamental oil-market balance,” said Helge Andre Martinsen, senior oil market analyst at DNB Bank ASA. “We need actual supply disruptions to push prices close to $70. But watch out for increasing Iranian proxy activity and an acceleration of Iran’s nuclear program in the months ahead.”

Brent futures for March settlement fell 78 cents to $64.20 a barrel on the ICE Futures Europe Exchange after losing 5.3% last week. The global crude benchmark traded at a $6.12 premium to WTI for the same month.

West Texas Intermediate crude for February delivery fell 96 cents to $58.08 a barrel on the New York Mercantile Exchange. The contract fell 6.4% last week, the most since mid-July.

While the chance of imminent war has lessened, relations between the U.S. and Iran remain combustible. Tehran has said it will stop abiding by limits on uranium enrichment, while the U.S. imposed new sanctions on the Islamic Republic. Oil markets are underestimating the risks in the Middle East and may be wrong in assuming Iran’s retaliation is over, said Jason Bordoff, head of the Center on Global Energy Policy at Columbia University in New York.

Meanwhile, Brazil and Guyana are set to add more than 400,000 barrels of combined daily supplies to the market this year, a volume that would offset most of the auxiliary cuts agreed to by OPEC and its allies in late 2019, according to Stratas Advisors.

Other oil market news
  • February gasoline settled slightly lower at $1.6573 a gallon.
  • With prices settling down again, OPEC+ remains focused on reducing inventories to normal levels by restraining production, Saudi Arabia’s Energy Minister said.
  • Hedge funds were more bullish on oil than at any time in the past nine months, with money managers’ net wagers on rising WTI increasing for a fifth week.
  • Expectations of global growth, particularly in emerging markets, mean 2020 is likely positive for commodities, with a number of wild cards, Citigroup Inc. said.
  • India — one of Asia’s biggest diesel exporters — is importing large quantities of the fuel as its refineries gear up for new emission rules that take effect in April.


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