Oil prices surged by over 5% last week following US President Joe Biden's comments regarding the potential for a retaliatory strike on Iranian oil facilities, however, experts believe any resulting price increases will be short-lived.
Prices increased following Iran's launch of dozens of ballistic missiles at Israel on Oct. 1, in retaliation for Israeli strikes that resulted in the deaths of Hamas leader Ismail Haniyeh, Hezbollah leader Hassan Nasrallah, and Islamic Revolutionary Guard Corps Commander Abbas Nilforoushan.
On the same day, Brent crude oil rose by over 3%, closing at $74.27 after Israeli Prime Minister Benjamin Netanyahu shared a video message on his social media account saying Iran had made a 'big mistake' and 'will pay for it' in relation to the missile attack.
The benchmark price per barrel increased by more than 4% to $77.83 and closed the day at $77.44 after President Biden hinted at the possibility of an attack on Iranian oil facilities on Oct. 3 by stating, 'We're in discussion on that.'
While President Biden's statement on Oct. 4—'If I were in their (Israel's) place, I would consider alternatives to strikes against oil fields'—tempered the upward momentum of prices, concerns about potential supply disruptions due to ongoing conflicts in the Middle East, home to a significant portion of global oil reserves, continued to dominate the oil market.
Following these statements, Brent crude oil closed the week ending Oct. 4 at $77.88, marking an increase of 0.6%. Meanwhile, West Texas Intermediate (WTI) crude oil rose by 0.9%, finishing at $74.06 per barrel.
On a weekly basis, Brent crude oil experienced its highest increase since January, with a gain of approximately 6%. Similarly, a barrel of WTI crude oil rose by over 5% for the week, marking its largest increase since August 2023.
- Impact of possible attack 'would not be permanent'
'I don't believe a strike on Iranian oil infrastructure would have lasting impact on global oil prices,' Alberic Mongrenier, executive director of the European Initiative for Energy Security, told Anadolu.
Mongrenier said that in the event of an attack, there could be short-term 'emotional' price increases, but OPEC and other producers have extra capacity to quickly compensate for Iranian oil.
Emphasizing that investors should follow the tactics of the OPEC+ group, consisting of OPEC and some non-OPEC producers, Mongrenier stated that although the OPEC+ group has been reducing production for a while to support oil prices, this situation has not had a great impact on the oil market.
'If Iran lost export capacity and they decide not to fill the gap, prices could increase. But again if they did that, some other producers could then fill this gap, and for this reason I do not believe it will happen,' Mongrenier added.
- 'Crude oil could soar above $100'
According to Bob McNally, President of Washington-based energy consultancy Rapidan Energy, crude oil prices would rise if Israel attacked Iran's oil refineries, but not for long.
McNally pointed out that any extensive damage to energy facilities in the Gulf region or prolonged disruptions in crude oil, refined products and LNG flows from the Arabian Gulf would adversely affect the already fragile economy.
'Depending on the extent of damage or disruption, crude oil prices could soar well above $100 per barrel, though they would likely decline as a demand-weakening economic contraction resulted,' McNally said.
He also noted that investors should pay attention to the targets Israel will choose for its initial retaliation, as well as targets Iran and its proxies select in subsequent escalatory exchanges, adding that any deaths of Israeli civilians could sharply escalate the conflict.
By Duygu Alhan
Anadolu Agency
energy@aa.com.tr