Oil Prices No Longer Follow Headlines
Chevron Profits Nearly Triple to $9.9 Billion What I Cover Irina Slav has been writing about global energy markets since 2007, covering the oil and gas industry, energy security, commodities, and the… A month ago, a series of news reports said oil flows out of Hormuz had recovered to pre-war levels, pushing oil prices lower.
Benchmarks are set for their fourth monthly gain in a row, and no amount of repeating that Gulf states are exporting even more oil than before the war can change that.
“What is the price of oil? Eight months into the war withIran, what should be a straightforward question has become surprisingly hard to answer,” JP Morgan’s head of global commodities, Natasha Kaneva, said as quoted by the Wall Street Journal this week.
The publication noted that Kaneva’s own oil price model suggests a fair value of $94 for a barrel ofBrent crude.
Yet Brent crude is trading at over $116 per barrel.
Below it, we find an abundance of risks for those shipping crude oil out of the Persian Gulf, dozens of tankers getting hit with drones or missiles in the past few weeks, and a shortage of tankers resulting from Saudi Arabia’s shift to ship-to-ship transfers off the coast of Oman to reduce the risk of having its tankers blown up in Hormuz or the Red Sea.
Stemming from all this is the issue of shipping costs for crude oil produced in the Middle East.
These have soared to all-time highs and prompted producing countries to discount their oil in order to stimulate demand—even though all those reports about improving oil flows in the Persian Gulf served to pressure oil prices.
This is because those flows cannot be sustained, not in an environment where the risk of a missile attack is so high.Related: Japan to Overtake China As World’s Top LNG Importer This Year “This recovery has coincided with a sharp deterioration in maritime security as vessels remain exposed to attacks and insurance and freight costs have risen sharply,” UBS commodity strategist Giovanni Staunovo said, as quoted by the Wall Street Journal.
The war premium on oil, in other words, is alive and well.
Yet it is not the only factor driving prices.
In the early weeks of the war, some observers were surprised that oil prices were not soaring higher.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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