Oil Prices Remain Hostage to Headlines Amid Geopolitical Tensions
Oil prices have become volatile and hostage to headlines, influenced by geopolitical developments. The Middle East accounts for over 30% of global crude oil production and nearly half of the world's proven oil reserves.
Recent tensions in the region sent Brent futures soaring to US$119.50 a barrel on March 9, before prices retreated following a preliminary peace deal. However, renewed tensions pushed Brent back above US$100 last week.
Not everyone believes the market is accurately pricing risks, with some arguing that supply risks remain underpriced. A local oil and gas chief executive says prices are being held down by 'artificial forces', while another describes the market as 'rigged'.
Stephen Innes of SPI Asset Management expects Brent to remain volatile in the months ahead, although he believes prices could gradually ease towards the low-US$80s a barrel. He notes that weaker Asian demand and rising non-OPEC supply limit the upside.