Oil is struggling this week but could primed for a near-term bounce, analysts say

Posted By: EN Todayon: November 10, 2023In: General Energy News, Oil & Gas News

Oil prices may be due for a pop after their recent struggles, according to two analysts. International benchmark Brent is down 3.7% this week, while U.S. West Texas Intermediate futures have lost nearly 4%. Over the past three months, both contracts are down more than 5%. To be sure, they were both up 2% in Friday’s session. These moves come as traders immediate fears of broader Middle East war and shift focus to worries that global economy is on the verge of a slowdown. However, the selling pressure may be overdone, putting crude in position to rebound in the near term. Phil Flynn, an energy market analyst at the Price Futures Group, said the market has essentially decided the risk premium that pushed U.S. crude to more than $90 a barrel on war fears in October is too expensive, and the $75 low this week on on worries that demand is falling in Europe and China is too cheap. Flynn said virtually everyone in the market right now is short oil futures. He added that, if oil settles above a 10-day moving average, a short rally could be in store. “You could easily mount a recovery here because we’re probably the most oversold in a year in the market,” said Flynn. While fears of demand destruction are overplayed, Flynn said, there is still a real risk of disruption from the war. Iranian Foreign Minister Hossein Amir-Abdollahian told Qatar’s Sheikh Mohammed Bin Abdulrahman Al Thani on Thursday that an expansion of the war in Gaza is “inevitable,” according to Iran’s Press TV . “The market has basically taken out all the risk of any supply disruption so if something does happen we could see a sharp reversal of prices,” Flynn said. Citi analyst Maximilian Layton said prices will likely consolidate at current levels for now, but there are upside risks on the horizon. OPEC+ will meet in two weeks and could take action to defend prices, while there’s still a low risk of regional war. “It appears to be consensus that this situation will hold, at least in the base case scenario. Still, a low but real risk of conflict spreading to other parts of the region remains, notably the risk of Israel-Iran attacks, or the US being drawn into the conflict, and/or imposing tighter sanctions on Iran again,” Layton wrote in a research note published Thursday. Barring a worst case scenario where there’s an attack on critical infrastructure or chokepoints, OPEC+ has amply spare capacity at 4.5 million barrels per day, Layton wrote.