Oljerapporter
(+) What happened to the geopolitical risk premium?
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Risk Premium
After experiencing a period of consecutive increases after the Hams militants’ attack in Israel on October 7, oil prices have found itself in a two-week decline, roughly stabilizing at a price equivalent to their pre-attack levels. The geopolitical dynamics in the Middle East have introduced a new level of unpredictability in the oil market, briefly reinstating a risk premium that appears to be inconsistent. The simmering geopolitical tension in the Middle Eastern counties have added a thick layer of uncertainty in the oil market and briefly added a risk premium, although a wobbly one. We still can`t rule out a wider escalation of the Israel – Hamas conflict, crude oil prices have shaved nearly all of the gains made after the Hamas attacks, with Brent hoovering just above pre-attack levels. The feeling in the broader oil market seems to be that demand is not there, and the refining margins is low despite the looming winter season. In the ongoing tug of war between macroeconomics and geopolitical, macro is this moment weighing heavier. The global economic weakness headlines could continue to drag oil demand insecurities well into 2024. This could be one of the explanations to why the risk premium struggles to find a homebase.
Israeli EAPC Oil Terminal closed.
The conflict escalating act of land invasion from Israeli troops in Gaza did little to change the geopolitical convictions among oil traders. To deter neighboring threats against the overextended Israeli forces, notably from the Lebanese militant group Hezbollah, the US sent rerouted aircraft carrier groups to strategic location. With less than a year away from the presidential election, the US desire for escalation is low.
In the past, Israel- Palestine conflicts have impacted the oil market directly, the larger 2006 conventional war in Lebanon did not impact the price of oil significantly. Then, like now the macroeconomics overweighed the conflict risk. Most of the 300 000 bpd Israeli crude imports normally comes via the EAPC Oil Terminal in the closed port of Ashkelon near the Gaza Strip, East Mediterranean, is now coming through the port of Eilat located in the Red Sea*. Marinetraffics expected arrival data from the port of Ashkelon is not available at the moment. Most of Israeli supply comes from Kazakhstan and Azerbaijan.
*Update since research: Israeli authorities say all ports are now fully open and operating at full capacity. Marinetraffic have no arrival data yet.
Weak demand signals.
Traders have remarked that many refiners had reduced their production in response to less profitable margins. This clarifies the reason behind certain shipments of Middle Eastern oil grades, such as the United Arab Emirates’ Upper Zakum or Murban, being offered again at reduced prices. Discussions in the market also suggest that Saudi Aramco has maintained its prices for Arab Light oil to Asia at a constant level for December. With a tepid economy, the substantial refining activities in China, along with decreasing export quotas, might already satisfy some anticipatory stockpiling needs. Despite the negative short term outlook GE Briefing caution bearish readers thinking of, or holding a short position in oil. With escalation in the Israel- Hamas conflict involving other nations oil price would spike up aggressively, with that in mind be careful with overnight or over weekend short positions.
