Home Morning Commentary Morning Commentary – Oil Prices Continue to Rise as Iranian Crisis Deepens

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It should come as no surprise that the Iranian crisis has helped to push oil prices sharply higher. Iran is one of the leading producers of crude oil, and has rapidly recovered its market share after years of sanctions were lifted in January of 2016. This marked the beginning of Iran’s strong drive to take market share away from Saudi Arabia, as the Saudis were forced to curtail production due to the massive glut in oil that dominated late 2015 and much of of 2016 as well. The OPEC deal of late 2016 led to Iran upping production in order to take advantage of capped production of the major OPEC members, and this situation has continued.

However, with the current political crisis in Iran, where massive protests to reform the current government have turned deadly, there is an expectation that oil production from the country might suffer, thus providing a strong boost to oil prices as uncertainty looms large. Add to this the hostile relationship between the Trump administration and Iran over the current nuclear deal, and we can expect the oil markets to continue to price in production disruptions going forward. There of course is also the potential of a government overthrow, which has indeed happened in the past for Iran and could certainly happen again.

Oil prices have risen to levels not seen since 2015, with both Brent crude and WTI trading above $60 per barrel. Some analysts are projecting that oil prices could reach $100 per barrel given current geopolitical conflicts in addition to record-low oil discoveries. Keep an eye on the energies markets as 2018 is set to be a very volatile year for the energies markets.

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