Russia expects oil price volatility to decrease

Oil prices have already factored in the geopolitics of Middle East tensions and recent price volatility will ease in the coming weeks, Russian Deputy Prime Minister Alexander Novak told Al Arabiya News in an interview published on Monday.

Oil prices have seen increased volatility in recent weeks as Israel continues to target Hezbollah in Lebanon and has also launched missiles into Yemen.

In early Monday Asian trade, both benchmarks Brent Crude and West Texas Intermediate rose more than 1 percent amid increased risks of all-out war in the Middle East as Israel continues to pound Lebanon after killing Hezbollah leadership . last week.

The conflict in the Middle East is definitely affecting oil prices, Russia’s Novak told Al Arabiya News’ Hadley Gamble on the sidelines of a Russian energy forum in Moscow.

However, the official added: “But a lot of times we can see that … when there’s a point where it affects (the price) quite drastically … it becomes part of the baseline.”

“In the last few weeks, prices have been volatile,” Novak said.

“(But) I think things will get back to normal.”

Novak also argued that Russia’s economy is not suffering much from Western sanctions and that Russia’s GDP growth has been higher than economic growth in Europe and the US.

“We can live with any price,” Novak told Al Arabiya News, referring to Russia’s economy and oil prices.

On Monday, oil prices were also supported by new stimulus and measures by Chinese authorities to revive the booming real estate sector.

Like Novak, some analysts believe that the geopolitics of the Middle East is already baked into the price of oil.

“The oil market’s response to developments in the Middle East over the weekend was somewhat muted. The market has become increasingly numb to tension in the region, given that after nearly a year of conflict there has still been no impact on oil output,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in -a note from Monday.

Supply risks could arise if Iran gets more involved in the conflict, but OPEC relies on a good amount of spare oil production capacity, making the market less concerned about supply disruptions, they added.

As of 6 a.m. Central Time, oil prices fell, with WTI trading below $68 and Brent hovering around $71.50.

By Tsvetana Paraskova for Oilprice.com

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