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The oil market rebounded on Tuesday following a strong bearish trend that plunged crude prices lower on Monday following Israel\u2019s retaliatory attack on Iran at the weekend. <\/p>\n
While it is still not clear if and how Iran will retaliate, the market is clearly of the view that supply risks have eased for now, ING said in a note.<\/p>\n
Brent crude increased $71.32 per barrel. The US benchmark West Texas Intermediate also rose by 0.45% to $67.68 per barrel, compared to $67.38 at the prior session\u2019s close.<\/p>\n
Over the last month, both benchmarks had increased with concern that any Israeli attack on Iran\u2019s energy infrastructure would lead to a wider regional war in the Middle East, where most of the oil resources are located.<\/p>\n
Oil prices slumped over 6% on Monday as Israel\u2019s retaliatory strikes on Iran avoided oil and nuclear facilities. Easing geopolitical risks dragged down oil prices, triggering a selloff across markets.<\/p>\n
However, tension in the Middle East remains elevated. Iranian President Masoud Pezeshkian said that they did not want war, but they would protect their rights and respond appropriately to Israel\u2019s aggression.<\/p>\n
The surge in the US dollar ahead of the run-up to the elections has also aided the decline in oil prices. Generally, a strong dollar reduces demand by making oil more expensive for foreign currency users.<\/p>\n
Meanwhile, the US plan to buy oil for the Strategic Petroleum Reserve (SPR) provided some support to prices. <\/p>\n
On Monday, the US Department of Energy\u2019s Office of Petroleum Reserves announced a new solicitation for up to 3 million barrels of oil for delivery to the SPRs from April 2025 through May 2025.<\/p>\n
ING analysts said the targeted response from Israel does leave the door open for de-escalation, which would allow fundamentals once again to be the dominant driver for the market.<\/p>\n
\u201cAnd fundamentals are expected to be bearish through 2025. Given the geopolitical uncertainty, many market participants have been protecting themselves from potential spikes higher through the options market\u201d.<\/p>\n
The Biden administration is looking to buy up to 3 million barrels of crude oil for the Strategic Petroleum Reserve (SPR) for delivery at the Bryan Mound site from April-May 2025, according to ING.<\/p>\n
The Department of Energy has so far bought more than 55 million barrels of crude oil for the SPR at an average price of $76\/bbl, compared to the roughly $95\/bbl the DoE received from emergency sales in 2022.<\/p>\n
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