Nagham Hassan, Market Analyst at eToro
Abu Dhabi, UAE – Oil prices have remained near the low-$70-per-barrel range despite continued geopolitical uncertainty across the Middle East, highlighting how quickly financial markets adjust to changing expectations rather than lingering risks on the ground, according to eToro.
Following the easing of fears around a prolonged disruption to global oil supplies, investors have largely priced out the geopolitical risk premium that drove crude sharply higher in June. While oil infrastructure and shipping flows have largely normalized, broader geopolitical uncertainty remains and market sentiment has shifted back towards supply-demand fundamentals.
Commenting on the market, Nagham Hassan, Market Analyst at eToro, said: “Oil prices are driven by expectations as much as they are by physical supply. Once markets became convinced that a prolonged disruption to global oil exports was unlikely, much of the geopolitical risk premium that had built up during the crisis quickly disappeared. Investors have also focused on improving supply dynamics, including stronger Russian exports and additional Iranian barrels returning to international markets, helping prices retrace much of their earlier gains.
“Russia continues to export high volumes of crude from its Baltic and Black Sea ports despite domestic fuel shortages, reflecting the fact that Ukrainian strikes have largely targeted refining capacity rather than export infrastructure. This has allowed crude that cannot be processed domestically to continue reaching international markets. Meanwhile, additional Iranian crude has also returned to global markets following the easing of US sanctions, further contributing to improved supply expectations.
Hassan noted that underlying market fundamentals continue to warrant close attention. “One of the clearest indicators is the continued drawdown in US oil inventories. Oil supply is determined not only by current production but also by the amount of crude held in storage. Even as US production has reached record levels, total inventories remain historically tight.
“If the market were genuinely as well supplied as current prices suggest, inventories would likely be stabilising or rebuilding rather than remaining under pressure. That disconnect suggests prices may have moved ahead of the underlying physical market and could quickly reverse should geopolitical tensions escalate again or unexpected supply disruptions emerge.”
- AS TOLD TO EMIRATESREPORTER.COM BY eToro
