Oil Prices Eye $100 A Barrel As War Risk Premium Returns

Crude Oil Leads the Charge as Commodities Market Heats Up in Q4 2024

This is now the fourth consecutive year that has seen a total of 47 Commodities ranging from the Metals, Energies to Agriculture notching up a series of back-to-back multi-year and all-time record highs.

While there is no denying that the entire Commodities market presents a hotbed of opportunity for traders looking to achieve extraordinary gains – analysts at GSC Commodity Intelligence believe that there is one sector in particular, that is the one to watch in the final quarter of 2024.

And that’s the Energies, but more specifically Crude Oil.

Iran’s latest strikes on Israel have restored a geopolitical war premium to Oil markets as the prospect of military escalation between the two Middle East foes calls into question vital flows from the world’s top petroleum-producing region.

On Monday, the price of Brent Crude Oil – the world’s most traded oil benchmark surged above $81 a barrel to hit its highest level since August – while WTI Crude Oil topped $77 a barrel, its highest level in over a month.

Brent and WTI have climbed 12% and 13% in the last week, respectively.

But more impressively, both contracts are now up almost 21%, since hitting a year-to-date low in early September.

The Big Question Now Is: Where Will Oil Prices Go From Here?

In a research note to clients, analysts at GSC Commodity Intelligence signalled – “traders are pricing in a strong risk that Israel may attack Iranian Oilfields as the war enters a new and more energy-related phase”.

Iran is the third largest Oil producer among the Organization of the Petroleum Exporting Countries – producing almost 4 million barrels of Oil per day, according to data from the Energy Information Administration.

The significance of this macro event playing out cannot be understated. The loss of Iranian Oil would ultimately leave the market in a supply deficit at a time when the U.S Strategic Petroleum Reserve has been depleted.

However, the biggest and most significant impact would be a disruption to flows through the Strait of Hormuz dubbed “the world’s most important Oil transit chokepoint”. Technically, such a move would halt about a fifth of global oil supply.

This would include exports from big Gulf producers including Saudi Arabia, UAE, Kuwait and Iraq. Qatar also exports its Liquefied Natural Gas through the Strait. A full closure of the Strait would very quickly lead to “runaway Oil prices” of $100 a barrel or higher.

Whichever way you look at it, one thing is clear. It certainly won’t take much for Oil prices to move significantly higher in this current macroeconomic environment and hit new highs in the coming weeks and months ahead.