Oil saw a slight decline, with attention focused on Israel’s potential response to Iran’s recent attack over the weekend, Bloomberg reported on Wednesday.
Brent crude slipped below $90 a barrel following a relatively stable performance on Tuesday, while West Texas Intermediate (WTI) hovered around $85. Israel has pledged to retaliate against Tehran for the drone and missile strike, although the United States has advised exercising restraint.
Throughout this year, crude oil prices have experienced significant increases due to geopolitical uncertainties in the Middle East and Russia, along with production cuts from OPEC+. However, remarks from Federal Reserve Chair Jerome Powell on Tuesday indicated a delayed timeline for potential interest rate cuts in the United States, which could dampen overall energy demand.
While the main movements in prices appear subdued, signals from the oil options market raise concerns. Bullish call options are trading at a considerable premium compared to bearish puts, reminiscent of levels seen in October during the Israel war on Gaza. Trading volumes for call options have surged, with over 3 million barrels’ worth of contracts placed, indicating a bet that US oil could spike to $250 a barrel by June.
Han Zhong Liang, an investment strategist at Standard Chartered Plc, shared an analysis suggesting that tensions may remain contained, potentially averting a broader conflict that could disrupt oil supply. Iran’s apparent restraint and diplomatic efforts between Israel and its allies may contribute to a smaller geopolitical risk premium, according to Han.
In addition to geopolitical factors, attention is also on stockpile data, following reports from the American Petroleum Institute indicating a significant increase in US inventories last week, while gasoline levels saw a decline. Official data on this matter are expected to be released later on Wednesday.
