The volatility in the oil market opens up opportunities for savvy investors.
There was a brief season of calm over the summer, but tensions in the Middle East have escalated again since a drone attack struck the Aramco’s oilfields in Saudi Arabia in mid-September which caused the oil prices forecast to increase.
The oil prices forecast is in flux as tensions remain unsettled. Other recent events affecting the long term oil price forecast include the departure of John Bolton from the Trump administration which resulted in the price of crude oil falling as it was believed new nuclear nonproliferation agreement negotiations were being planned.
Oil Prices Forecast
The market was also buzzing as the Saudis made another attempt to sell shares in their Saudi Aramco, valued by the Crown Prince at about $2 trillion.
Hoping for a massive Initial Public Offering (IPO), plenty of bankers were looking at a value of about $1.5 trillion. Then the drones hit the oil fields knocking half of Saudis production offline, and the hopes for an IPO blew up with the aggressive strike.
Washington alleged Iran was responsible for the September 14th attack, which caused the oil prices to rise significantly and by the largest percentage since the Gulf War in 1991.
Although oil prices dropped when it was reported Iran agreed to free the U.K.-flagged tanker, which has since headed to Dubai where its crew would disembark.
Between the drone strikes and the U.K.-flagged tanker held by Iran, projecting a price of oil forecast is tenuous at best. Iran denies any responsibility for the drone attacks and threatens an “all-out war if any retaliation is taken.”
Long Term Oil Price Forecast
Great Britain’s Prime Minister, Boris Johnson stated Britain believes it’s likely Iran was the force behind the September 14th drone attacks on the Saudi oil fields and says London will be working alongside the United States and other European allies to reduce the tensions in the Gulf region.
The most bullish factor in the oil market since President Trump pulled the United States from the nuclear proliferation agreement has been Iran.
Earlier in 2019, tempers and temperatures rose when Washington refused to extend exemptions to eight countries that purchase crude from Iran. This was done in an attempt to place greater pressure on Iran’s leadership. numerous provocations including attacks on oil tankers in the Straits of Hormuz, drone target practice, and straying missiles in Saudi territory.
These incidents followed by the drone attacks on Saudi oil production escalated the tensions to a higher level. US Secretary of State Mike Pompeo stated that the attack on Saudi oil fields was “an act of war.”
The oil prices forecast could be controlled by a volatile market over the coming weeks and possibly months depending on responses to the attack from the administration in Washington and from Saudi Arabia.
Volatility Affects Price of Oil Forecast
It was the Iran factor that supported the crude oil market over the summer and kept the price from falling below the $50 level. Now that political tensions have risen dramatically, higher lows can be expected. There is also an increase in the potential for other price spikes.
When the Saudi oil minister was replaced, plans were made for another attempt for an IPO of Aramco. For investors, the drone attack on the oil fields presented a financial risk for buying Aramco shares.
As the region remains tense, investors are cautious. The drone attack reduced the valuation of the largest and most profitable company in the world, disrupted the world’s oil supplies, affected the Saudis financially, and interfered with plans for an IPO that would grow the size of Saudi Arabia’s sovereign wealth fund.
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