Oil Stabilises After Sharpest Drop Since June

The price of oil stabilised after slumping to its largest drop since June, with the United States signalling that there would be no swift retaliation against Iran. West Texas Intermediate remained around $59 a barrel after falling 4.6 per cent on Thursday. Brent fell 4.2% and is currently $63.76 per barrel. 

According to the New York Times, Israel's Prime Minister Benjamin Netanyahu called on President Donald Trump to delay action against Iran. Because of this, there is a lower chance of having a sudden interruption of oil production or transportation through protest activity in the Islamic Republic.

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Easing Iran Tensions Drive Rebound

As a result of the U.S.' delay in making a decision, there is less chance of escalation regarding oil production from OPEC's fourth-largest export nation. In addition to that, the concern of supply being interrupted due to violent protests was priced into the markets before the recent price declines, so the markets are now pricing in fewer near-term threats to Iran's output of more than 3 million barrels per day.

Early morning trading in Singapore has WTI February futures flat at $59.26 per barrel. However, given the halt in volatility after recent price increases. 

U.S. Military Moves and Global Factors

Despite the delays of recent weeks, Washington continues to reinforce its presence in the Middle East. According to military officials reported by Fox News, an aircraft carrier will deploy to the region, and several other military assets will be relocated there shortly after that event. The continued commitment of the U.S. to maintain a strong and vigilant presence in the region is evidenced by these actions.

Oil prices increased dramatically from January 8 through January 31, driven by fears regarding Iran, as well as turmoil in Venezuela and difficulties with Kazakhstan shipping oil via the Black Sea. The recent gains in oil production have created a situation whereby production has outpaced consumption, following what was the worst year for American oil producers.

Regional Pressure Points Persist

The U.S. Government has intensified its policing efforts regarding vessels carrying oil from Venezuela that are currently under U.S. sanctions. U.S. authorities have seized a total of six Venezuelan oil tankers operating out of the Caribbean in recent months. The Trafigura Group is preparing to remove its initial cargo of Venezuelan oil from a facility in Curacao on behalf of an oil marketing firm in the U.S.
The interplay of these factors has resulted in a return to relative stability in global pricing for crude oil while traders await additional developments related to military activities in the region and protest activity in the coming weeks.