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The Fear Premium Is Back In Oil

Without the fear premium, oil doesn’t have much else to boost it for 2020. And right now, that fear premium has produced a sudden $3 surge in oil prices following the assassination by US drone strike of Iran’s key general of the Quds foreign arm, Qasem Soleimani.

The million-dollar question now is whether that premium has legs, or whether it will be another blip on the radar such as that following the attack on Saudi Aramco facilities that threatened to take a major chunk of the world’s oil offline.

Whether the premium has legs must be viewed from various prisms. In this case, it has no immediate, direct impact on oil supply. The Saudi Aramco attack did, and still failed to boost oil beyond a day.

One prism is the impeachment of a US president and looming 2020 elections. There’s nothing like the dazzling assassination of a foreign army general who has been targeted many times in the past to captivate the audience. As far as campaign stunts go, it doesn’t get much better than this.

But the ‘fear premium’ is a tricky one to navigate. Fear is fleeting. Right now, that premium is based on the fear of an all-out war between Iran and the US, which would easily become World War III. But 21st century warfare isn’t the same. It’s cold war tactics with targeted hot zones, and arguably, it’s already been going on for some time.

If oil is waiting for some definitive escalation that looks like World…




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