Oil prices started the year on a high note as some geopolitical tension pushed aside bearish concerns. Both WTI and Brent opened above $60 per barrel for the first time in years.
The protests in Iran were the main driver of the bullish sentiment in the oil market. Anti-government demonstrations swept across the country in recent days, and unlike the widespread protests in 2009, the current rallies are related to economic woes and are also taking place in more cities than just Tehran. “Growing unrest in Iran set the table for a bullish start to 2018,” the Schork Report said in a note to clients on January 2.
At least 14 people have been killed in the protests and an estimated 450 have been arrested. It is the most serious challenge to the Iranian government in years, and Iran’s Supreme Leader put the blame on foreign agents, presumably the United States. “In recent days, enemies of Iran used different tools including cash, weapons, politics and intelligence apparatus to create troubles for the Islamic Republic,” Ayatollah Ali Khamenei said.
Meanwhile, tension over North Korea – although not a new development – could be spreading to include a spat between the U.S. and Russia as well as the U.S. and China. Reuters reportedlate last week that Russian oil tankers have sent fuel to North Korea on multiple occasions in the last few months by transferring cargoes at sea. If true, the actions would amount to a violation of UN sanctions. Sources told Reuters that there is no evidence that the Russian state was involved, but the news has raised the specter of U.S.-Russian tension as Washington seeks a hard line on Pyongyang.
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