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Oil prices seen under pressure as Paris attacks spark demand worries

Published 11/15/2015, 10:22 AM
© Reuters. The prices at a Valero Energy Corp gas station are pictured in Pasadena

By Ron Bousso and Libby George

LONDON (Reuters) - Prices of oil and other commodities will come under renewed pressure on Monday on fears that Friday night's deadly attacks on Paris will further slow the global economy. 

Oil is already trading near its six-year lows and healthy demand has been a major factor preventing the prices from sliding any lower amid a worsening global oil glut due to abundant supplies.

At least 129 people were killed on Friday evening in a series of coordinated attacks on Paris with Islamist militants claiming responsibility for the carnage.

"Currently sentiment is really bearish, so this could be seen as hurting demand, so oil prices could fall further," said Amrita Sen from Energy Aspects.

Sen added that a short-term sell-off could, however, be followed in the mid-term by a rally if people think events in Paris could lead to a serious escalation of tensions in the Middle East.

Analysts from Eurasia Group said the attacks will likely undermine the French government's ability to focus attention on the improving economy.

Looking at the broader financial repercussions, global stocks are set for a short-term sell-off on Monday but few strategists expect a prolonged economic impact or change in prevailing market directions.

ActivTrades chief analyst Carlo Alberto de Casa and Ed Meir, analyst at INTL FCStone, both said they expect a moderate rebound in gold prices given that equities and commodities were poised to be hit.

"People in France are in shock. They are not doing much shopping and that could last for a few days," said Olivier Jakob from Petromatrix consultancy.

"The rest of the world is not as deeply affected to change consumer behavior," said Jakob adding that the bearish impact of Paris attacks would likely be short-lived.

"The attack could however result in a re-calibration of France's foreign policy and positioning in the Middle East," he added.

An OPEC delegate from a Gulf producing country said he also believed that in the mid-term oil prices could get some in support due to rising geopolitical tensions especially if the international community takes additional steps to reduce smuggling of oil and hits oil facilities under Islamic State's control in Syria and Iraq.

But the short-term impact could see prices remain under pressure, the OPEC delegate agreed: "Certainly any more controls -- though it ensures safety of travelers -- will reduce transport. Look at what happened after the September 11 attacks," he said.

He added the markets would react depending on details of how severe and prolonged any restrictions across France and the rest of Europe are. 

© Reuters. The prices at a Valero Energy Corp gas station are pictured in Pasadena

ING Bank energy analyst Hamza Khan said the Western coalition could now begin targeting IS-run oil fields and refineries but the risk would be destruction of already perilous Syrian supplies.

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