SMM News: in recent days, the United States and Iran around the Iranian nuclear issue and the formation of regional tensions continue to escalate. As the US military unmanned reconnaissance plane was shot down by the Iranian military earlier on the 20th, the possibility of military conflict between the two sides became more apparent, and international oil prices rose sharply under the influence of a variety of factors. Last week, light crude for August delivery on the New York Mercantile Exchange rose 9.67%, while London Brent crude for August delivery rose 5.34%.
From the perspective of the foreign exchange market, the US dollar index fell significantly for two consecutive days on the 19th and 20th, with a cumulative decline of more than 1% over the two days. Under the circumstances that the Federal Reserve has clearly released a signal to cut interest rates, the market is generally bearish on the trend of the US dollar in the second half of this year. The sharp rise in international oil prices on the 20th partly reflects the impact of changes in the US dollar exchange rate.
However, based on the existing US position and preparation, there is little chance of a large-scale conflict between the two forces, and geopolitical tensions between the United States and Iran are difficult to keep oil prices high and even more difficult to reach triple-digit levels.
First, Iran shot down the US drone on the grounds that it invaded Iranian airspace. The US stressed that the drone was in international airspace when it was shot down, but did not deny that the drone had entered Iranian airspace. At the same time, Houthi forces in Yemen also launched attacks on facilities in Saudi Arabia, following attacks on drilling facilities related to ExxonMobil Oil Company in Iraq, as well as repeated attacks on oil tankers near the Strait of Holmes. Obviously, Iran has made a gesture of not hesitating to fight or even seeking war, and the United States has not shown its intention to use force against Iran, nor has it seen mobilization as it did before the Iraq war, and its allies are even more skeptical of the position and expression of the United States, and the US media have shown concern about the possibility of war.
Although tensions in the Middle East are likely to persist, they are not yet likely to have a large impact on crude oil production and transport in the Middle East, and the risk of medium-term supply disruptions is small.
Second, from the perspective of conventional supply, OPEC is still seeking to extend the production limit policy, Venezuela and Iran crude oil supply continues to decline on the international market supply impact is relatively limited. Shale oil and gas production in the United States is still high, with the right price, the future will be able to meet the market demand.
Third, from a demand point of view, the international community has reached a consensus on the slowdown in economic growth in major economies such as the United States this year, and it is unlikely that international oil demand will be unexpectedly strong in the context of trade tensions. The weakness on the demand side has even prompted a number of market researchers to predict the possibility of a collapse in oil prices in recent days.
It is undeniable that the number of sharp fluctuations in international oil prices has increased significantly in recent weeks, and international oil prices are still prone to short-term fluctuations in the coming weeks around major uncertainties such as OPEC production cuts and the situation in the Middle East.
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