Oil supply from the Middle East will not be impacted by the conflict in the Middle East, according to Torbjorn Tornqvist, co-founder and chairman of one of the world’s biggest independent oil traders, Gunvor.
“I’m very confident that this will not have any impact at all on oil supply,” Tornqvist said at the Energy Markets Forum in the UAE on Tuesday, commenting on the conflict in the Middle East.
Instead, it “seems the market is more focused on concerns about the lack of growth in oil demand,” Tornqvist said, as carried by Bloomberg.
International crude oil prices have largely ignored the latest escalation in the Middle East, even amid heightened risks of an all-out war in the Middle East as Israel continues to pound Lebanon after the killing of the Hezbollah leadership last week.
Early on Tuesday, both benchmarks, Brent and WTI, were down by about 1% as persistent concerns about demand and large spare production capacity at OPEC were overshadowing risks to supply from the Middle Eastern conflict.
Many analysts believe that the Middle East geopolitical premium is already baked in in the price of oil.
“The oil market’s response to developments in the Middle East over the weekend has been somewhat muted. The market has become increasingly numb to the tension in the region given that, after almost a year of conflict, there has still been no impact on oil production,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a Monday note.
Risks to supply could emerge if Iran becomes more involved in the conflict, but OPEC sits on a good amount of spare oil production capacity, which makes the market less anxious about supply disruptions, they added.
“Crude remains rangebound near recent lows as the geopolitical risk bid remains absent, with traders instead focusing on the prospect of additional and currently unwanted supply,” Saxo Bank said in a note on Tuesday.
By Charles Kennedy for Oilprice.com
