Dramatic week for crude oil, with futures contracts for Brent crude oil registering some of the biggest jump in history before falling sharply due to ongoing concerns about growth and demand, says Ole Hansen, director of commodity strategy at Saxo Bank. Although it was probably a temporary matter, the oil balance slipped sharply again in favor of higher prices last week, when attacks on the world’s largest oil processing plant in Khurais and Abqaiq in Saudi Arabia temporarily cut back 5% of the world reserve. For two days, uncertainty led to major price changes before Saudi officials calmed markets after they said stocks would return to normal faster than the market feared it would happen.

Following a week in which oil market reports warned of the risk of surplus stocks due to slower demand growth, the new maximum affected the markets, but could have been much worse, taking into account the amount of oil affected. Rising oil prices in a period of economic slowdown leading to even lower demand growth is not a good combination. This is probably the main reason why oil recovery has been so rapid.

However, the geo-political risk premium, estimated to be somewhere above $60/ barrel for Brent will require most likely more time to disappear. Iran, accused of being behind the attacks, is increasingly in the situation of being cornered, with increasing pressures resulting from sanctions making it increasingly unable to sell its oil. “For this reason, we believe that the range for the Brent crude oil around $60/b observed in the last three months has now gone above, to $65/b,” says Hansen.