Crude oil price: Crude oil went from cheap to expensive again, price close to $100, why the market mood suddenly changed?

Crude Oil Price: Crude oil prices have seen huge fluctuations in the international market throughout this week. On Friday morning, the price of Brent crude once again reached close to $100 per barrel. Around 7 a.m., Brent crude futures were trading at $99.86 a barrel, up 1.6 percent. At the same time, American West Texas Intermediate (WTI) crude also rose 1.15 percent to $91.56 a barrel.

Earlier on Wednesday, heavy selling was seen in the oil market. Both major oil benchmarks then fell more than 8 percent to their lowest level since August 31. However, this decline did not last long and prices started rising again from Thursday evening itself. The market made a strong comeback on Thursday, with Brent crude futures up 3.8 percent to close at $98.29 a barrel. Similarly, American WTI crude also rose 2.7 percent to close at $90.52 per barrel. The same trend that started from Thursday continued on Friday morning.

The US election changed the diplomatic winds

This hope of peace in the oil market has arisen after the results of the US mid-term elections. Democrats have taken control of both houses of the US Congress in the election. It is believed that this political shift could limit the support for President Donald Trump in the war against Iran. On the other hand, there are also reports that Tehran is reviewing the proposals made by the mediators regarding its nuclear program. These signals have given some relief to the market.

Iran has strict conditions on the Strait of Hormuz

Amid diplomatic expectations, uncertainty over the security of oil supplies still lingers. Iran has made its stance clear that it will not fully open the Strait of Hormuz until the US naval blockade of its ports is lifted. Along with this, Iran has also put a condition to ease the sanctions imposed on it and immediately release the seized assets.

Burning ships at sea, attacks on refineries

There is a constant threat to merchant ships at sea. According to UK Maritime Trade Operations (UKMTO), at least five incidents involving vessels have been reported in the Persian Gulf since Sunday. Iran’s Islamic Revolutionary Guard Corps said two oil tankers and a tugboat caught fire in separate incidents while trying to use an unauthorized passage through the Strait of Hormuz.

Meanwhile, attacks by Iran-backed Houthi rebels in Yemen have greatly increased regional tensions. Keeping this in mind, Saudi Arabia has declared an alert regarding a possible threat to its Red Sea oil export hub ‘Yanbu’. On the other hand, Ukraine has also launched new attacks on Russian oil refineries. This poses a deep threat to Russia’s ability to export diesel.

Crude could go up to $125 again

One relief on the supply front is that crude oil exports from the Gulf countries have returned to near pre-war levels. However, the cost of freight transportation is still very high. Research firm Eurasia Group has lowered its estimate of a new US attack on Iran from 65 percent to 60 percent. In addition, the possibility of a diplomatic settlement has been reduced from 20 percent to 10 percent. The company has increased the probability of prolonged deadlock from 15 percent to 30 percent. Eurasia Group has warned that Brent crude prices could return to the $110 to $125 per barrel range if these tensions flare up again.