Oil traders are preparing for a potential escalation of hostilities in the Middle East following the US midterm elections on November 3, which could impact Ghana's oil prices.
ING commodity strategists predict that if hostilities do not resume, oil prices are likely to drop. President Trump has repeatedly hinted at restarting attacks on Iran after the midterms.
The escalation is not a done deal, according to ING's Warren Patterson and Ewa Manthey. If it does not come to pass, oil prices may pull back.
The analysts wrote that an agreement between the US and Iran may not be needed for prices to drop. The market's risk premium may start eroding if there are no renewed strikes on Iran after the elections.
The situation in the Persian Gulf is not back to normal, with Iranian strikes on tankers reaching an all-time high this month. Despite this, diesel prices are down following reports of Russian diesel on its way to the US. The ICE gasoil crack spread is down to $70 per barrel, the lowest since early October.
The potential drop in oil prices could have implications for Ghana's economy, particularly if the country is importing oil. A decrease in oil prices could lead to lower fuel costs for Ghanaian consumers and businesses. On the other hand, if hostilities resume, oil prices may increase, which could lead to higher fuel costs and potential inflation.
The Ghanaian government and businesses should monitor the situation closely, as changes in oil prices could impact the country's economy. The Bank of Ghana, led by Governor Ernest Addison, may need to adjust monetary policy in response to changes in oil prices.