Tensions Between the U.S. and Iran Pose Supply Risks
Analysts warn that the U.S.-Iran tensions pose risks to global oil supply. Following a deadly drone attack by Iran-backed militants in Jordan, the first incident of U.S. military deaths since the Israel-Gaza war, Washington has pledged to take “all necessary actions” to protect its troops. If tensions escalate further, particularly through direct confrontation, there is an increased risk of Iran’s oil supply being negatively impacted. For most of 2023, Iran exported 1.2-1.6 million barrels per day of crude oil, representing 1-1.5% of global oil supply. The main concern is the potential blockade of the Strait of Hormuz, through which 15-20% of global oil supply passes.
Rising Risks in the Middle East and Supply Disruptions
Recently, an attack on a Trafigura oil tanker in the Red Sea heightened the risks of supply disruptions. The growing possibility of the U.S. becoming entangled in the conflict further adds to the apprehension. ANZ analysts stressed that while traders have started covering short positions, long positions have only marginally increased, indicating a lack of conviction at the moment.
Furthermore, the rise in oil prices precedes the Federal Reserve’s upcoming rate decision. The Federal Open Market Committee will commence a two-day meeting on Tuesday, and policymakers are expected to maintain interest rates at their current levels. However, some investors speculate that the U.S. central bank may abandon its hiking bias.
Inventory Expectations and Data Release
Last week, it is anticipated that U.S. crude oil and distillates inventories experienced a decline, while gasoline stocks likely witnessed an increase, according to a Reuters poll. The American Petroleum Institute will release stockpiles data on Tuesday at 4:30 pm EST (2130 GMT), while the Energy Information Administration, the statistical arm of the U.S. Department of Energy, will release its data at 10:30 a.m. EST (1530 GMT) on Wednesday.