The recent flare-up in the Middle East, involving strikes between Israel and Iran, led to a spike in global crude oil prices, reaching 6-month highs. However, the prices did not surpass the $100 per barrel mark as some analysts had forecasted. The tension started on April 1, 2024, with an alleged Israeli strike in Damascus, Syria that killed Iranian generals and officers, escalating further with Iran’s retaliatory attack on Israeli soil on April 13.
Despite the escalating tensions, the situation seems to have calmed down following Israel’s alleged limited counterattack on Iran’s nuclear program facilities in Isfahan. No lives were lost in the exchange, and material damage was downplayed by Iran. This has allowed both the region and the oil market to relax, with Brent crude prices sliding back to around $87.20 per barrel, though still near the highest levels seen since October 2023.
The stability in the global crude oil market following the Middle East tensions can be attributed to several factors. Firstly, there were no supply disruptions in the region, and strong non-OPEC supply from countries like the U.S., Canada, Brazil, Norway, and Guyana. Additionally, OPEC+ supply cuts and spare capacity in the supply system can be utilized in the event of a major escalation in hostilities. The uncertain global demand picture, especially with China’s crude imports, also plays a role in stabilizing prices.
Looking ahead, without major escalations or sudden increases in demand, the oil market is expected to remain within a certain price range in 2024. Brent crude’s price support level is expected to hold near $85 per barrel, with a resistance level at $95. The current market dynamics are primarily driven by a tight market for heavy sour crude due to OPEC+ production cuts, along with a marginal surplus in light sweet crude due to elevated U.S. production levels.
Overall, the recent tensions in the Middle East between Israel and Iran had a temporary impact on global crude oil prices, causing a spike in prices but not reaching predictions of hitting $100 per barrel. The situation has since calmed down, allowing prices to stabilize around $87.20 per barrel. With no major disruptions in supply and factors like non-OPEC supply, spare capacity, and uncertain global demand influencing the market, the outlook for 2024 suggests a continuation of the current price range for crude oil.
