Last week shows that oil prices are not the indicator for Middle East tensions they once were, and worries about global demand and growing U.S. production has changed that dynamic.
One of the energy industry's greatest concerns has been that a Mideast conflict could disrupt oil traffic in the key Strait of Hormuz, a narrow waterway through which about a fifth of the world's oil moves.on Friday, for alleged marine violations, and temporarily stopped a second one, oil prices moved slightly higher, not with the velocity that might have been seen during other periods of tension.
Last Tuesday, oil prices had moved down dramatically on comments from Secretary of State Mike Pompeo that Iran was willing to talk about its missile program."We sold off 4.5% when Pompeo suggested that the Iranians were willing to talk about the ballistic missile program. Minutes later, the Iranians said 'no we're not' and oil prices still didn't recover. Since Tuesday, it's been nothing but escalation and oil has kind of shrugged it off," said Croft.
Croft said a big reason why oil traders are not driving oil prices higher is because of the huge increase in U.S. production. The U.S.has now surpassed Russia and Saudi Arabia to become the biggest oil producer. She said oil trading has also changed and the market is more computer-driven with fewer big commodities players trading it.
Earlier this month, Iran admitted to shooting down a U.S. drone and the White House prepared to respond militarily. Trump called off the retaliatory response at the last minute. Kilduff said oil could head higher after its steep drop, as central banks gear up to provide stimulus to the global economy. The European Central Bank meets Thursday and it is expected to cut rates at that meeting or the next, in September. The Federal Reserve meets on July 30 and 31, and it is widely expected to cut interest rates.that Iran does not want a war, and that the door to negotiations would be wide open if Trump lifts his sanctions.
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