Oil prices continue to rise: Geopolitical tensions fuel the markets

Crude oil prices continue their upward trend, fueled by potential supply disruptions in the Middle East and new warnings from the Organization of Petroleum Exporting Countries (OPEC) and its allies (OPEC+). Price War Principle: Prince Abdulaziz bin Salman, Saudi Arabia’s Oil Minister, warned, according to a Wall Street Journal report, that prices could drop to $50 per barrel if global oil producers do not adhere to production cuts. These statements are interpreted as a threat that Saudi Arabia is ready to start a price war to secure its market share. Oil prices had previously declined before jumping sharply this week due to rising tensions in the Middle East. Iran attacked Israel on Tuesday, reportedly firing between 100 and 200 rockets after Hezbollah leader Hassan Nasrallah was killed. International benchmarks like the Brent Crude Futures rose by up to 5% on Tuesday before ending the day with a gain of about 2.4%. On Wednesday, Brent Crude Futures were at around $75.50, representing an increase of 2.75%. Front-Month WTI Crude Futures rose by 3.06%, trading at around $72. Saudi Arabia requires prices of at least $85 per barrel to finance its planned economic transformations. The increased tension in the Middle East is also expected to drive up U.S. gasoline prices. According to ABC News, drivers could expect increases of 10 to 15 cents per gallon. The United States Oil Fund rose by 2.7% to $74.06, while the IShares U.S. Oil & Gas Exploration & Production ETF increased by 2.24% to $93.50. The SPDR Energy Select Sector Fund achieved a gain of 1.25% to $90.93. Analysts’ Opinions: OPEC plans to hold a virtual meeting of the Joint Ministerial Monitoring Committee on Wednesday, which Roth MKM analysts consider important. It is expected that OPEC members will discuss whether production cuts should be eased in December. Analysts from Truist Securities and Jefferies highlighted other opportunities in light of the increased global risk situation. Jefferies emphasized opportunities in the tanker market due to higher risk premiums, while Truist projected additional growth in the order books for the U.S. defense industry.