Oil and bitumen prices ignited by Middle East Tensions
As tensions in the Middle East flared last week, the global Brent crude oil index saw a significant 4.1% jump on Monday, 16 October, reaching a high of $88.15 per barrel during the initial Asian trading sessions.
This spike, however, still falls short of the $97.69 record set on 28 September.
Investor Shift to Secure Assets
Heightened tensions have triggered a ripple effect on the global market. Investors, keeping a close eye on the unfolding situation, are leaning towards more secure assets. Analysts’ observations reveal a surge in gold and other safe-haven assets’ appeal, coupled with a heightened demand for U.S. treasury bonds, as market participants gauge the geopolitical risks before making any significant moves.
“It is a perfect hedge against international turmoil,” remarked Peter Cardillo, the chief market economist at Spartan Capital Securities. He also forecasted potential benefits for the dollar amidst the geopolitical uncertainty.
Middle East’s Key Players: Iran and Saudi Arabia
Iran and Saudi Arabia, pivotal players in the oil market and notable influencers in political developments, are now under the global spotlight. Observers are keenly monitoring their next moves and potential responses to the changing regional dynamics.
Washington’s Move on Venezuelan Oil Sanctions
Adding another layer to the complex geopolitical tapestry, Washington announced on October 19 that it would lift oil sanctions on Venezuela for a duration of six months. This decision paves the way for PDVSA to export crude oil and fuel to the U.S. Notably, Iran’s oil export surge in recent months has primarily benefited the U.S. and Europe, acting as a buffer against production cuts from Russia and Saudi Arabia, ensuring global markets remain stable.
Belt and Road Forum: A Counter to G20?
East’s powerhouses, Russian President Putin and Chinese President Xi Jinping, recently met in China for the Belt and Road Forum, attended by representatives from over 130 nations. United Nations Secretary-General, António Guterres, is also present. This gathering hints at an alternative stance to the G20 forum held in India.
Bitumen Market Fluctuations
The previous week witnessed erratic shifts in fuel and bitumen prices:
- On 18 October, Singapore’s HSFO CST180 saw a hike of $12, settling at $503, with its bitumen price reaching $520. Remarkably, this marked the first time in months that Singapore’s bitumen exceeded its fuel costs.
- South Korea’s bitumen experienced a $5 surge, ending at $425.
- Bahrain’s bitumen underwent a $25 drop, concluding at $415.
- European bitumen prices fluctuated between $450 and $520.
India’s bitumen, despite a modest $6 rise in mid-October, appears to maintain its sluggish upward trend. Issues concerning project fund allocations persist, suggesting that import levels might remain subdued in the coming months.
Impact on Iran’s Vacuum Bottom and Shipping Charges
With the ascent in crude oil and fuel prices, expectations are that Iran’s vacuum bottom will see an increase. However, the competitive landscape amongst manufacturers seems to be thinning, placing exporters in a tight spot due to potential export taxes.
Simultaneously, there’s buzz about a potential hike in shipping fees from Jebel Ali to various destinations in the near future.
Market Pressure Due to Rising Oil Prices
The market currently experiences significant strain due to escalating fuel and crude oil prices. Yet, any further surge in bitumen prices might necessitate an additional catalyst to materialize.
