The new decade started on a turbulent note for the oil markets with the US and Iran coming closest than they ever have to a direct conflict following the US killing of Iranian military commander Qassem Soleimani in a drone strike in Baghdad on January 3.
The incident sent Brent futures prices racing above $70/b briefly, before a de-escalation of the crisis pulled prices back to the mid-$60s/b. S&P Global Platts Analytics expects Brent upside to be capped in the high-$60s/b range.
While geopolitical risks have deflated, S&P Global Platts Analytics has warned that further retaliation is still possible.
“Iran’s relatively restrained initial reaction to US drone strikes [has] cooled the temperature for now, but we believe its retaliation is far from complete, and will revert to more typical indirect tactics in the months ahead. Gulf oil infrastructure and transit remain very much at risk,” Paul Sheldon, chief political adviser at Platts Analytics said.
Sheldon, in his latest Political Risk Special Report, cited Iranian retaliation as well as a political and security vacuum in Iraq as the top bullish oil market risks for this year.