Despite fears of “$150 oil” on a Middle East conflict, oil prices have continued its downward momentum.
USOIL – Daily Chart
On a daily chart, the oil price is testing the lows from early October around $81.50. Below that level is a cluster of support around the $80 mark.
Oil prices could soar to a record of more than $150 a barrel if the war between Israel and Hamas leads to a large-scale conflict in the Middle East such as 50 years ago, the World Bank has warned.
In its first major report on the economic risks of an escalation of the war, the World Bank said there was a risk of the cost of crude entering “uncharted waters”.
A “large disruption” scenario comparable with the Arab oil boycott of the West in 1973 would create supply shortages that would lead to the price of a barrel of oil increasing from about $90 to between $140 and $157”. The previous record set was in 2008 at $147 per barrel.
“The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s – Russia’s war with Ukraine,” said Indermit Gill, World Bank chief economist. “That had disruptive effects on the global economy that persist to this day”.
“Policymakers will need to be vigilant. If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades – not just from the war in Ukraine but also from the Middle East.”
At present, oil is optimistic that the conflict will not be as bad as initially feared.