Does the latest oil pullback indicate an end to its recent rally?

[Lillian McKenna]

[Simon Mugo]

Most analysts are attributing the latest pullback in oil prices to profit-taking by investors who have reaped handsome returns in recent weeks by the commodity’s massive rally given that it set a weekly record of an 8.8% gain last week.

The fundamental drivers behind the rally are still intact given the escalating tensions between the US and Iran as Iranian President Hassan Rouhani criticised the Trump administration for new sanctions targeting the country’s Supreme Leader and other top officials.

Iran termed the new sanctions as marking the end of any diplomatic relations between the two nations, which could lead to a major disruption of the global oil supply chain and higher oil prices in the future.

Supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) are still in place, which means that any disruption of oil exports within the Gulf region could trigger a massive rally in oil prices.

Most analysts believe that the existing fundamental conditions, coupled with geopolitical factors, could push oil prices much higher in the future.