Russia’s Novak believes oil prices have already incorporated the geopolitical premium from Middle East tensions.
Oil prices had spiked early on Monday morning after a weekend of significant escalation of conflict in the Middle East.
OPEC’s production cuts and China’s economic measures are also supporting oil prices.
Oil prices have already factored in the geopolitical premium from the Middle East tensions and recent price volatility is set to ease in coming weeks, Russia’s 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 fired missiles into Yemen.
Early on Monday in Asian trade, both benchmarks, Brent Crude and West Texas Intermediate, were up by more than 1% amid heightened risks of an all-out war in the Middle East as Israel continues to pound Lebanon after the killing of the Hezbollah leadership last week.
The Middle Eastern conflict is certainly impacting 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 we can often see that…when there is a moment when it is affecting [the price] rather drastically…it becomes a part of the baseline.”
“In recent weeks the prices have been volatile,” Novak said.
“[But] I think things are going to get back to normal.”
Novak also claimed that Russia’s economy isn’t suffering too much from the Western sanctions and that Russian GDP growth was higher than the economic growth in Europe and the U.S.
“We can live through any price,” Novak told Al Arabiya News, referring to Russia’s economy and oil prices.
On Monday, oil prices were also bolstered by new stimulus and measures from China’s authorities to revive the flailing property sector.
Similarly to Novak, some analysts believe that the Middle East geopolitical premium is already baked in in the price of oil.
“The oil market’s response to developments in the Middle East over the weekend has been somewhat muted. The market has become increasingly numb to the tension in the region given that, after almost a year of conflict, there has still been no impact on oil production,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a Monday note.
Risks to supply could emerge if Iran becomes more involved in the conflict, but OPEC sits on a good amount of spare oil production capacity, which makes the market less anxious about supply disruptions, they added.
As of 6am central time, oil prices had fallen back, with WTI trading below $68 and Brent hovering around $71.50.
By Tsvetana Paraskova for Oilprice.com
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