Oil prices stabilize as US reserves grow amid Middle East tensions

On the New York fuel exchange, West Texas Intermediate crude for May contracts is trading at around 83 US dollars per barrel, marking a slight increase of 0.29 percent. Similarly, on the London ICE exchange, Brent crude for June deliveries is priced at 87.63 USD per barrel, experiencing a rise of 0.39 percent.

Following a period of tension due to escalating conflicts in the Middle East, the oil market has brought some positive news. Crude oil prices have stabilized following a rise in reserves in the United States.

The stabilization in prices is attributed to recent data released by the US Department of Energy (DoE), which shows an increase in crude oil reserves last week by 2.7 million barrels (0.6 percent), reaching a total of 446 million barrels. Analysts highlight that this is the highest level of stored crude reserves in ten months.

During the same period, gasoline reserves decreased by 1.2 million barrels (0.5 percent) to 227.4 million barrels, and stocks of distilled fuels, including heating oil, saw a reduction of 2.8 million barrels (2.3 percent) to 115 million barrels.

Despite the optimistic signals from the data on reserves, investors are keeping a close watch on the geopolitical situation in the Middle East. The chief of staff of the Israel Defense Forces, Herzi Halevi, has announced a response to the Iranian attack from Saturday night to Sunday. The spokesperson for the Israel Defense Forces (IDF), Daniel Hagari, stated that Iran "will not come out unscathed" following the weekend's attack.

Iran executed a significant rocket and drone attack on Israeli territory, launching 36 cruise missiles, 110 ballistic missiles, and 185 drones. These actions came in retaliation for the earlier bombing of the Iranian consulate in Damascus by Israeli aviation and the killing of three high-ranking officers of the Revolutionary Guard. According to Israeli reports, 99 percent of the Iranian missiles were intercepted and neutralized, failing to reach their targets. The Iranian Foreign Minister, Hosejn Amir Abdollahian, has declared that the Iranian "retaliatory operation" is now complete.

Experts from Goldman Sachs Group Inc. believe that current crude oil prices are influenced by geopolitical risks, with the risk premium between 5 and 10 dollars per barrel. Daan Struyven, the head of oil market research at Goldman Sachs, mentioned that the absence of new developments and the de-escalation of the Israeli-Iran conflict could lead to a decrease in raw material prices.

Moreover, a possible extension of the current production cuts by OPEC+ countries for another quarter could cause prices to rise. Struyven suggests that in such a scenario, Brent crude prices could climb to 90 or even 100 dollars per barrel.

Vandana Hari, co-founder of the consulting firm Vanda Insights, observes that markets currently overlook the likelihood of an Israeli retaliation to the Iranian attack. "Brent has now returned to levels before the April 1st attack on the Iranian consulate, indicating that the recent period of increased risk insurance due to heightened Israel-Iran tensions has eased," Hari comments. In her view, lower oil prices midway through the week indicate a diminishing risk premium associated with the tensions in the Middle East.