Commodity markets, particularly precious metals and oil, is stirred up this week by the unstable situation in the Middle East. The dangerous escalation of the conflict between Israel and Iran is causing a significant increase in oil prices, especially today, just before the weekend. If the "expected" Iranian missile attack on Israeli government institutions were to occur, there is a high chance of a significant gap in oil prices at the opening of next week. Why?
Iran currently produces about 3 million barrels per day (officially). Meanwhile, official exports are around 1.5 million barrels per day, mainly going to Asian countries. Production and exports have reached levels not seen since 2018/2019. If Iran were to decide to attack Israel, the United States could then decide on even stronger sanctions and try to compel other countries to respect the current ones (although this may be difficult, given that a large part of the exports are directed to China). However, it is worth noting that official exports from 2020-2022 fell to almost zero!
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Create account Try a demo Download mobile app Download mobile appThe threat of another drop in available supply by 1.5 million barrels per day (and actually more, considering the twice as large production) could trigger a reaction similar to the one at the turn of March and April last year. After the decision to limit production by OPEC+, there was a sudden increase in oil prices by about 5 USD per barrel (about 7%). This would mean an increase in WTI to around 93/94 USD per barrel after the weekend. A full-scale conflict would certainly lead to even greater increases, above 100 USD per barrel, due to the fact that the Middle East region accounts for close to 1/3 of the supply in the global oil market.
Iran currently exports about 1.5 million barrels per day according to official data. Source: Bloomberg Finance LP, XTB.
WTI is testing the 87-88 USD per barrel levels at the end of the weekend. The recent increases in oil or gold are precisely the result of concern about the situation in the Middle East. On the other hand, the absence of an escalation over the week could result in a drop in prices to 85 USD per barrel, as was the case earlier this week. Source: xStation5
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