Oil pared back bullish gains on Tuesday as anxieties around tensions in the Middle East began to ebb, though concerns remained.
The front-month contract for Brent crude North Sea oil was last seen down USD 0.73 at USD 68.18/bbl – off Monday’s three-month high – while the WTI equivalent was USD 0.53 lower at USD 62.74/bbl.
Crude has appreciated more than 5% amid growing tensions over last week’s assassination by a US drone of Iranian general Qasem Soleimani.
“But we can’t let complacency overtake cautiousness as the risk is far from depleting,” said Margaret Yang of CMC Markets in a note.
“Although a full blown war in the Middle East is highly unlikely, Iran may still carry out small-scale retaliations against the US for killing its top military commander last week.
“Tensions surrounding the Strait of Hormuz remains elevated in the near term. This puts crude oil price in a good position to spike up higher when tension re-escalates,” added Yang.
Escalation of risk
“A sudden escalation in geopolitical risks have added an immediate premium for oil prices as traders deliberate retaliatory actions and broad political concerns in the Middle East,” said analyst Phillip Futures in a note.
“Oil prices look poised to trend higher as markets remain cautious over political developments and militaristic concerns for the immediate term.
A renewal in global risk appetites will keep oil prices trending within the bullish channel for Q1 2020,” it added.
