Oil prices were heading for their worst week since July early on Friday, as fears about a full-blown conflict between the U.S. and Iran in the Middle East subsided a week after prices surged on the U.S. killing of a top Iranian military commander.
As of 09:51 a.m. EDT on Friday, Brent Crude was down 0.46 percent at US$65.07, while WTI Crude traded below the US$60 a barrel mark, down 1.09 percent at US$58.91.
Oil prices surged last Friday, following the assassination of Iran’s most powerful and visible military leader, Qassem Soleimani, by U.S. forces in Iraq. The attack was carried out following a direct order from U.S. President Donald Trump and was aimed at ‘deterring future attacks’ on U.S. diplomats and service members throughout the region.
Early on Monday, the oil price rally continued, with Brent Crude prices exceeding US$70 a barrel for the first time since May last year. WTI Crude was also up, rising above US$64 a barrel, also the highest price level since May 2019.
On Tuesday, prices started to retreat as investors and speculators awaited an Iranian retaliation for Soleimani’s assassination, but were dialing down the panic that oil supply disruptions may be imminent.
Retaliation came later the same day, sending oil prices up by 4 percent for a few hours.
But then oil prices retreated again, only to further fall later on Wednesday when the Energy Information Administration reported a crude oil inventory build of 1.2 million barrels for the first week of the new year.
Despite the two sudden price spikes due to the U.S. and Iran actions over the past week, early on Friday oil prices were below the levels seen just before Soleimani’s assassination and were also set for their biggest weekly loss since the middle of July last year.
The nearest catalyst for oil prices could be the U.S. rig count report from Baker Hughes due out later on Friday.
By Tsvetana Paraskova for Oilprice.com
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However, a continued de-escalation of the trade war in 2020 will accelerate the decline in glut in the market thus pushing oil prices up. Therefore, oil prices could be projected to average $73-$75 a barrel in 2020.
The continued decline in US oil rig counts, while slightly bullish in nature, is an indication of a US shale oil industry in a terminal state and headed to its demise probably in 4-9 years from now.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London