Commerzbank’s Carsten Fritsch notes that Oil prices initially fell as indirect US–Iran talks in Oman reduced fears of a US strike, lowering the geopolitical risk premium. However, prices later recovered as attention shifted to ongoing supply risks, including sharply reduced exports from Kazakhstan and uncertainty over Russia’s ability to place barrels if India curtails Russian imports under a new trade arrangement with the US.
Geopolitics and supply disruptions drive oil
“This means that a US military strike against Iran is off the table, at least for the time being, which in turn led to a decline in the risk premium on oil prices. Prices recovered their losses as trading continued. This is because other supply risks remain.”
“Kazakhstan is likely to export 35% less oil than originally planned this month if the recovery of production in the Tengiz oil field continues to be sluggish. This was reported by Reuters, citing four sources close to the trade. Daily oil exports via the CPC pipeline and the connected terminal on the Black Sea would amount to only around 1.1 million barrels per day instead of the intended 1.7 million.”
“Another factor supporting prices is India’s apparent move away from oil imports from Russia. This is likely to happen as part of the bilateral trade agreement with the US (we reported).”
“The oil market is likely to tighten significantly as a result. In December, Indian oil imports from Russia still stood at 1.1-1.2 million barrels per day, which India will now have to source elsewhere.”
“Russia will therefore have to grant substantial price reductions and rely even more heavily on ships from its shadow fleet. This is because the EU Commission intends to ban the transport of Russian oil in tankers from EU countries altogether in its 20th package of sanctions.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/oil-supply-risks-offset-iran-de-escalation-commerzbank-202602101140
