By Oil prices continued to climb on Monday, fueled by political uncertainty in major oil-producing countries. The market reacted to news that Iranian President Ebrahim Raisi was feared dead following a helicopter crash and Saudi Crown Prince Mohammed bin Salman’s cancellation of a trip to Japan due to health concerns surrounding King Salman.
Brent crude, the international benchmark, gained 32 cents, or 0.4%, to reach $84.30 a barrel by 0240 GMT, its highest level since May 10. U.S. West Texas Intermediate crude (WTI) rose 5 cents to $80.11 a barrel, after briefly touching $80.23 earlier, marking its highest point since May 1.
Reports from Iranian officials indicated that a helicopter carrying President Raisi crashed on Sunday. As search teams located the wreckage in the mountainous terrain and icy weather conditions, hopes for the survival of Raisi and Foreign Minister Hossein Amirabdollahian began to fade, according to an Iranian official.
Meanwhile, Saudi Arabia’s Crown Prince Mohammed bin Salman postponed his scheduled visit to Japan, which was set to begin on Monday, citing health issues with King Salman. Japan’s Chief Cabinet Secretary Yoshimasa Hayashi confirmed the postponement. The Saudi state news agency reported on Sunday that 88-year-old King Salman would undergo treatment for lung inflammation.
IG Markets analyst Tony Sycamore commented on the impact of these events, stating, “If the father’s health is failing, it adds to the layer of uncertainty already circling energy markets this morning following the news that the Iranian President is missing.” Sycamore added that WTI prices could potentially rebound further toward $83.50 after surpassing the 200-day moving average of $80.02, supported by factors such as China’s recent property measures, including relaxed mortgage rules, lower deposits, and the purchase of unsold homes.
The previous week saw Brent end with a gain of about 1%, its first weekly gain in three weeks, while WTI rose 2% on the back of improved economic indicators from the United States and China, the world’s largest oil consumers.
Despite the volatility in the region, oil prices experienced only slight movements. Warren Patterson, head of commodities strategy at ING, noted, “The oil market remains largely rangebound and without any fresh catalyst we will likely have to wait for clarity around OPEC+ output policy in order to break out of this range.” The Organization of the Petroleum Exporting Countries and allies, collectively known as OPEC+, are scheduled to meet on June 1.
Patterson also pointed out that the market appears increasingly numb to geopolitical developments, likely due to the substantial amount of spare capacity OPEC currently holds.
Saul Kavonic, an energy analyst at MST Marquee, emphasized that the market and industry are already accustomed to Crown Prince Mohammed Bin Salman’s leadership in the energy sector, adding, “Continuity in Saudi strategy is expected regardless of this health issue.”
In the United States, the government took advantage of the recent dip in oil prices, announcing late last week that it had purchased 3.3 million barrels of oil at $79.38 a barrel to help replenish its Strategic Petroleum Reserve following a massive sale from the stockpile in 2022.
Supporting the market last week were signs of easing inflation in the U.S., which boosted expectations of interest rate cuts. Such cuts could potentially decrease the value of the dollar, making oil more affordable for holders of other currencies.
As the market closely monitors developments in Iran and Saudi Arabia, the uncertainty surrounding the fate of key political figures is likely to continue influencing oil prices in the near term.
Credit: Reuters
