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Fear premium is coming back into crude: Vandana Hari

I do not see a huge upside in oil price. For that, we will need a final deal between the US and China.

ET Now|
Oct 11, 2019, 03.59 PM IST
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Before the Iran tanker fire news came out, oil prices were going up on hopes of an interim deal between the US and China, says Vandana Hari, Founder & CEO, Vanda Insights. Excerpts from an interview with ETNOW.

There has been news reports which said that an Iran oil tanker was on fire near Jeddah and there has been an oil spill as well. The sudden surge in oil prices is what we are looking at. Is it purely because of the event that has occurred with respect to this oil tanker catching fire or do you see other triggers to this as well?
We have seen crude oil price jump nearly a dollar in the past one hour or so. Very clearly, we saw the spike after the news on Iranian oil tanker being on fire in the Red Sea broke. Yesterday, crude closed a little bit higher in the west and it was continuing to trend higher after modest gains earlier in the day in Asian markets. This was before the tanker attack news came out and that was driven by hopes of an interim deal between the US and China.

Right now, it is up nearly 2% now compared with Thursday’s close that is very clearly because of this renewed tensions in the Middle East. Essentially, fear premium is coming back into crude.

What do you make of the range for the crude? Do you think crude will break out of this range or will it be in $55-65 range?
It hinges very heavily on what happens in Washington later tonight. We understand that there has been a lot of twists and turns in the entire US-China trade war and trade talks story over the past week. It has almost reached a crescendo this week. We have had bad news, we have had positive news and we have had negative news.

The last twist in this saga was some optimism expressed by the US president and the report that the President is due to meet the Vice Premier of China Liu He, who is also the head of delegation. That seems to have given the market a great deal of hope that perhaps they will end up with some sort of an interim deal. Nobody is holding their breath for a comprehensive deal anytime soon, but an interim deal might be possible wherein they would agree on the easier bits in the trade war. If that happens, then crude will get some support. We see crude Brent supported above $60 a barrel. I do not see a huge upside. For that, we will need to see a final deal.

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