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Oil prices did not rise sharply after major producer Iran attacked Israel, raising the risk of wider conflict in the oil-rich Middle East.
The most traded oil contracts rose slightly on April 16. Brent crude rose 0.1% to $90.17 a barrel. US West Texas Intermediate (WTI) crude rose 0.3% to $85.66 a barrel. Prices had fallen on April 15 after the weekend attack.
The impact of Iran's actions has been priced in by markets, as warnings were issued ahead of the attack, although the extent of the response remains unclear.
Tamas Varga, an analyst at PVM Energy, said the market was discounting the possibility of an escalation of the conflict between Iran and Israel. He said Israel’s response would be cautious and controlled, while Iran would not escalate the situation further as it wants to continue exporting crude.
US Treasury Secretary Janet Yellen warned that further sanctions could be imposed on Iran. US sanctions have reduced Iran's oil revenues and restricted its trade.
Iran continues to produce nearly 3.2 million barrels of oil per day, while the country ranked ninth in global crude oil production last year, according to the International Energy Agency.
Hvalbye said Israel could pressure its ally the United States to impose tougher sanctions on Iran. Such sanctions, especially on Iran’s oil exports, could reduce oil supplies by 0.5 million to 1 million barrels per day. Still, Iran’s oil production would remain above the 1.9 million barrels per day it reached in mid-2020.
Mr. Varga predicted that the Organization of the Petroleum Exporting Countries’ spare production capacity would be enough to mitigate the impact of any disruption to supply from Iran, provided major producer Saudi Arabia was not drawn into the conflict and the Strait of Hormuz, a key oil shipping route, remained open.
