Crude oil prices on Monday started with a gain following the news of Iranian President Ebrahim Raisi’s death in a helicopter crash and Saudi Arabia’s Crown Prince Mohammed bin Salman’s visit to Japan being delayed due to the king’s illness.
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In early Monday trading, the price of Brent crude rose to $84.2 per barrel (bbl), while crude oil also increased to $80.1/bbl, marking a 1.34% gain for the week. US West Texas Intermediate (WTI) crude rose by $0.15, or 0.2%, to reach $80.21/bbl.
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At the time of writing, Brent crude oil futures fell to $83.02/bbl, marking a 1.4% decrease since Monday, and WTI futures fell to $78.67/bbl.
Oil markets could become unstable due to uncertainty surrounding the selection of Iran’s new president. Investors will closely monitor the potential effects on the country’s oil production and exports.
However, it is not clear yet how the developments in the two countries will impact the market in the medium to long term.
Saudi Arabia and Iran have some of the largest crude oil reserves in the world, collectively accounting for around one-third of total global oil reserves.
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By GlobalData“Saudi Arabia and Iran are also among the largest crude oil producers. However, Iran’s ability to increase its oil production has been significantly impacted by sanctions over the past [few] years,” said Rami Khrais, an upstream analyst at GlobalData.
“In contrast, Saudi Arabia holds a special position in the oil markets thanks to its spare production capacity, ranging from 1.5 to two million barrels per day. This allows the kingdom to inject additional crude into the markets in cases of shortages caused by geopolitical tensions and other factors,” Khrais added.
According to Reuters, the sudden death of the president should not impact Iranian oil policy, as Supreme Leader Ayatollah Ali Khamenei has the ultimate authority and makes the final decisions on all state matters.
While some analysts have suggested that Raisi’s death and the crown prince’s delayed visit to Japan could lead to oil price volatility – causing concern in financial markets, particularly in commodities, and resulting in increased uncertainty – not all analysts agree.
“It is unlikely that the news from the Middle East, namely the death of the Iranian president or the illness of the Saudi king, will have a long-term impact on the oil markets or the oil industry in these two countries,” Khrais added.
