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DOSSIER |
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Oil investors are adrift in Red Sea rip currents
The 2022 delivered 34800t DWT Oil Products Tanker ARRAN anchored off Singapore awaiting offloading Finally, there’s Iran. Sanctions on the export of the country’s oil, imposed by Biden’s predecessor Donald Trump, remain in place. But enforcement of the curbs has been lax. Iran’s oil exports have increased from under 500,000 barrels a day in 2020 to nearly 1.5 million barrels a day, according to Vortexa data. The $62 billion of oil and gas revenue the IEA estimates that the country generated in 2022 gives Tehran extra firepower to finance its proxies in the “Axis of Resistance” around the Middle East – including the Houthis. Ahead of a U.S. presidential election in which petrol prices will play a role, Biden will be loath to risk raising costs for American drivers by squeezing Iranian exports. But pressure from opposition Republican politicians might force his hand. The U.S. has already launched airstrikes against the Houthis and Iranian proxies in Syria and Iraq, after attacks Washington claims were responsible for the deaths of three U.S. servicemen. Tensions between the U.S. and Iran could escalate further. As ever, Saudi Arabia has a decisive role to play. MbS may see the logic of aiding Biden by helping to control the oil price. Yet the kingdom’s de facto leader has had his differences with the U.S. president. He may prefer a return of Trump, who took a milder line on controversies like the killing of journalist Jamal Khashoggi by Saudi agents in 2018.Even if Saudi does help, it cannot guarantee a calm Middle East. Tehran, which despite recent Chinese-brokered talks is perpetually at odds with Riyadh, might be enraged if stricter U.S. sanctions blocked it from Asian markets. In 2019, rocket attacks on Saudi’s key refinery at Abqaiq briefly knocked out around 50% of the kingdom’s oil supply. Iran denied involvement, but the strikes occurred the last time its oil was tightly sanctioned. The biggest risk is that Iran plays its trump card and blocks the Strait of Hormuz, the narrow stretch of water that lies between the Arabian Gulf and the Gulf of Oman, which is the conduit for around 21 million barrels of daily oil, over a fifth of world consumption. That would imperil around four times the amount of supply initially feared to be at risk from Russian sanctions in 2022. And it would almost certainly push prices far above $100 a barrel. Such an extreme outcome is unlikely. Indeed, matters could equally take a more positive turn. Israel and leading Western states are currently engaged in protracted talks about a ceasefire in Gaza, mediated by Qatar. If successful, Hamas would progressively release over 100 Israeli hostages, in return for a cessation to hostilities likely to last months. After that, Israeli Prime Minister Benjamin Netanyahu would probably come under pressure from both Western and Arab leaders not to restart the war. A more permanent truce could prompt Saudi Arabia and allies to formally recognise Israel as a state – key to easing tensions in the region. Still, these talks aren’t certain to succeed. And towards the end of January investors started to markedly increase the proportion of bets made on oil prices rising rather than falling via the futures market. The current surprising calm may precede a storm.
Source: Reuters (Editing by Peter Thal Larsen and Oliver Tasli
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LMB-BML 2007 Webmaster & designer: Cmdt. André Jehaes - email andre.jehaes@lmb-bml.be
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