Economy & Business

    Oil steadies after death of Iran's president, Saudi king's ill health

    The Hawk
    May20/ 2024
    Last Updated:

    Oil prices remained stable on Monday amid political turmoil in key producing nations. The death of Iran's president in a helicopter crash and the postponement of Saudi Arabia's crown prince's trip to Japan due to the king's health created uncertainty.

    Representative image of an oil refinery

    London: Oil prices held steady on Monday amid political uncertainty in major producing countries after Iran's president died in a helicopter crash and Saudi Arabia's crown prince deferred a trip to Japan on account of his father, the king's, health.

    Brent crude was down 35 cents at $83.63 a barrel by 1205 GMT. The U.S. West Texas Intermediate (WTI) June contract , set to expire on Tuesday, edged 43 cents lower to $79.63 a barrel. The more-active July contract was down 38 cents at $79.2.

    Iranian President Ebrahim Raisi, a hardliner long seen as a potential successor to Supreme Leader Ayatollah Ali Khamenei, was killed in a helicopter crash in mountainous terrain near the Azerbaijan border, officials and state media said on Monday.

    Iranian oil policy should be unaffected by the president's sudden death, as Khamenei holds ultimate power with a final say on all state matters.

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    Separately, Saudi Arabian Crown Prince Mohammed bin Salman postponed his visit to Japan, scheduled to begin on Monday, because of a health issue with his father King Salman, said Japan's Chief Cabinet Secretary Yoshimasa Hayashi.

    Saul Kavonic, an energy analyst at MST Marquee, said the market is already accustomed to Crown Prince Mohammed Bin Salman's leadership in the energy sector.

    "Continuity in Saudi strategy is expected regardless of this health issue," he said.

    In Europe, another Russian energy facility was hit. The Slavyansk oil refinery, located in the Krasnodar region, was damaged after a weekend drone attack, state-run TASS reported on Monday, citing a company security official.

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    Russia has reported a rise in Ukrainian attacks on its territory since its forces opened a new front in northeastern Ukraine's Kharkiv region earlier this month.

    "From here, we expect overall market fundamentals to improve and see similar inventory draws and price action as observed last summer, with Brent oil moving $10 higher from current levels by September," JPMorgan analysts wrote in a note late Sunday.

    The Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, are scheduled to meet on June 1.

    "The market also appears increasingly numb to developments on the geopolitical front, likely due to the large amount of spare capacity OPEC is sitting on," said Warren Patterson, head of commodities strategy at ING.