The weekend terrorist attack in Iran could be more important to oil prices than Sunday’s OPEC meeting, as the attack could exacerbate a rivalry in the most crucial oil-producing region in the world, analysts at RBC Capital Markets said on Sunday.
While a joint committee of OPEC and allies met in the weekend to discuss the state of the oil market, refraining from issuing any recommendation on lifting oil production, an attack on a military parade in the city of Ahvaz in Iran killed 25 people, including 12 of Iran’s elite Islamic Revolutionary Guards Corps, who vowed a “deadly and unforgettable” revenge for the terrorist attack.
On Sunday, the OPEC/non-OPEC Joint OPEC-non-OPEC Ministerial Monitoring Committee (JMMC) met in Algeria and said that “despite growing uncertainties surrounding market fundamentals, including the economy, demand and supply, the participating producing countries of the DoC continue to seek a balanced and sustainably stable global oil market, serving the interests of consumers, producers, the industry and the global economy at large.”
In a note on Sunday, as carried by CNBC, RBC Capital Markets analysts, led by global head of commodity strategy Helima Croft, said that:
“We believe that Saturday’s terrorist attack in Iran could prove to be the weekend’s more consequential event as it will likely exacerbate the already dangerous Middle East antagonisms.”
The pledge by the Islamic Revolutionary Guards Corps to exact revenge raises the risk of the cold war in the Middle East becoming a “hot one,” according to RBC Capital Markets.
“We also contend that the risk of such a destabilizing clash will only grow as Iran comes to feel the full effects of economic sanctions that are designed to radically alter the behavior of the ruling regime, if not change it,” the analysts said.
Following the OPEC meeting, which left the OPEC+ supply as-is without announcing any immediate production boosts, oil prices jumped to four-year highs early on Monday, with Brent Crude breaking above $80 at $80.03 as of 07:41 a.m. EDT, and WTI Crude rallying 1.68 percent at $71.97.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More