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New York Times
12 hours ago
- Business
- New York Times
Large Oil Producers Around the Persian Gulf Ramp Up Exports
As fighting between Israel and Iran intensifies, the major oil producers around the Persian Gulf, including Saudi Arabia, have been racing to load tankers with exports, possibly as a hedge against future disruption. These increases are occurring despite jumps in insurance costs and shipping rates and hazards like jamming of navigation systems. Analysts say that these producers are preparing for the possibility that fighting could spread to oil export installations, which have been largely spared so far, or that shipping could be disrupted through the Strait of Hormuz, the narrow passageway from the Persian Gulf through which a large portion of both oil and liquefied natural gas travel. 'They want to make sure that they reduce the risks,' said Homayoun Falakshahi, head of crude oil analysis at Kpler, a research firm. 'That means export as much as possible, as soon as possible.' Kpler estimated that Saudi Arabia's oil exports had increased 16 percent through mid-June from the same period in May. Other producers in the region like the United Arab Emirates and Iraq have boosted shipments around 10 percent, Mr. Falakshahi said. Want all of The Times? Subscribe.
Economic Times
3 days ago
- Business
- Economic Times
Can crude oil prices really double? Let's look at the worst-case scenario
The Strait of Hormuz is open — for now Live Events Markets are nervous, not panicked (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel As the Middle East slides into its most dangerous flashpoint in years, doomsayers warn that Brent prices could surge past $150 per barrel in a worst-case scenario, a geopolitical shock big enough to sever key oil routes and ignite panic across global markets. While such an outcome is far from consensus, traders are beginning to price in the tail risks as Israel–Iran tensions simmer. Brent crude held near $73 a barrel on Tuesday, up from sub-$67 levels last week, after Israeli strikes hit Iranian energy and military infrastructure. Tehran has vowed retaliation, and though ship-tanker traffic through the Strait of Hormuz remains intact, there's growing anxiety that the conflict could spill into the waterway that carries a fifth of the world's oil. The geopolitical premium in crude has unmistakably returned.'Crude oil prices resumed gains on Tuesday as escalating conflict between Israel and Iran reignited supply concerns,' said Rahul Kalantri, Vice President of Commodities at Mehta Equities. 'While Iran has signaled willingness to de-escalate and resume nuclear talks, uncertainty over further retaliation kept traders cautious.'While the market reaction reflects real unease, forecasts are split on how high oil could go if events spiral further. Singapore-based DBS Bank has floated $150 as the upper bound for Brent in a doomsday scenario that assumes Iranian exports are fully knocked out and regional producers fail to plug the there's been no disruption to oil flows. Vessels are still passing through the Strait of Hormuz, and ports like Kharg Island remain untouched. Homayoun Falakshahi, head of crude oil at Kpler, told the Financial Times that the current Israeli strategy appears aimed at crippling Iran's internal energy logistics, not its export may explain the relatively measured response from global markets. J.P. Morgan, one of the largest oil market participants on Wall Street, said prices currently reflect only a '7% probability' of a nightmare scenario, one in which regional tensions curtail not just Iranian exports but also threaten Gulf shipping lanes.A wider conflict that closes Hormuz, the bank said, is still unlikely. 'Iran would be damaging its own position, both economically and politically, by irritating its main customer,' JP Morgan said, referencing China's growing dependence on Iranian crude. Even as geopolitical temperature rises, J.P. Morgan is sticking with a base case oil forecast of $60–$65 for U.S. investment bank also flagged potential ripple effects on inflation and monetary policy. 'An attack on Iran could spike oil prices to $120, driving U.S. CPI to 5%,' it said, warning of a reversal in disinflation and an abrupt rethink of the Federal Reserve's rate-cut recent price action shows nervousness is creeping in. Brent rallied nearly 9% last week after the Israeli strikes, while gold surged and equities fell. U.S. inflation expectations also nudged higher. Analysts warn that a spike in crude could push American CPI back toward 5%, complicating central bank rate-cut plans which imports nearly 40% of its crude via the Strait of Hormuz, is watching closely. 'Almost 50% of our LNG imports also flow through this route,' said Probal Sen, Senior Research Analyst at ICICI Securities, in an interview with ET Now. 'Sustained oil above $75 would hurt marketing margins for refiners and pressure the rupee.'Public-sector oil firms such as Hindustan Petroleum and Bharat Petroleum could see earnings volatility, Sen said, though valuations may remain attractive on longer energy analysts say Gulf producers like Saudi Arabia and the UAE have every reason to keep the situation from spiraling. Both are in the middle of multiyear economic overhauls that depend on regional stability, not a war that shocks oil markets and freezes capital now, oil traders are pricing fear, not fallout. But with every new headline from Tehran or Tel Aviv, the $150 scenario inches a little closer from the outer rim of possibility into something more plausible. It's still a hedge. But it's no longer a fantasy.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
Time of India
3 days ago
- Business
- Time of India
Can crude oil prices really double? Let's look at the worst-case scenario
As the Middle East slides into its most dangerous flashpoint in years, doomsayers warn that Brent prices could surge past $150 per barrel in a worst-case scenario, a geopolitical shock big enough to sever key oil routes and ignite panic across global markets. While such an outcome is far from consensus, traders are beginning to price in the tail risks as Israel–Iran tensions simmer. Brent crude held near $73 a barrel on Tuesday, up from sub-$67 levels last week, after Israeli strikes hit Iranian energy and military infrastructure. Tehran has vowed retaliation, and though ship-tanker traffic through the Strait of Hormuz remains intact, there's growing anxiety that the conflict could spill into the waterway that carries a fifth of the world's oil. The geopolitical premium in crude has unmistakably returned. 'Crude oil prices resumed gains on Tuesday as escalating conflict between Israel and Iran reignited supply concerns,' said Rahul Kalantri, Vice President of Commodities at Mehta Equities. 'While Iran has signaled willingness to de-escalate and resume nuclear talks, uncertainty over further retaliation kept traders cautious.' While the market reaction reflects real unease, forecasts are split on how high oil could go if events spiral further. Singapore-based DBS Bank has floated $150 as the upper bound for Brent in a doomsday scenario that assumes Iranian exports are fully knocked out and regional producers fail to plug the gap. The Strait of Hormuz is open — for now Crucially, there's been no disruption to oil flows. Vessels are still passing through the Strait of Hormuz, and ports like Kharg Island remain untouched. Homayoun Falakshahi, head of crude oil at Kpler, told the Financial Times that the current Israeli strategy appears aimed at crippling Iran's internal energy logistics, not its export infrastructure. That may explain the relatively measured response from global markets. J.P. Morgan, one of the largest oil market participants on Wall Street, said prices currently reflect only a '7% probability' of a nightmare scenario, one in which regional tensions curtail not just Iranian exports but also threaten Gulf shipping lanes. A wider conflict that closes Hormuz, the bank said, is still unlikely. 'Iran would be damaging its own position, both economically and politically, by irritating its main customer,' JP Morgan said, referencing China's growing dependence on Iranian crude. Even as geopolitical temperature rises, J.P. Morgan is sticking with a base case oil forecast of $60–$65 for 2025. The U.S. investment bank also flagged potential ripple effects on inflation and monetary policy. 'An attack on Iran could spike oil prices to $120, driving U.S. CPI to 5%,' it said, warning of a reversal in disinflation and an abrupt rethink of the Federal Reserve's rate-cut trajectory. Markets are nervous, not panicked Still, recent price action shows nervousness is creeping in. Brent rallied nearly 9% last week after the Israeli strikes, while gold surged and equities fell. U.S. inflation expectations also nudged higher. Analysts warn that a spike in crude could push American CPI back toward 5%, complicating central bank rate-cut plans globally. India, which imports nearly 40% of its crude via the Strait of Hormuz, is watching closely. 'Almost 50% of our LNG imports also flow through this route,' said Probal Sen, Senior Research Analyst at ICICI Securities, in an interview with ET Now. 'Sustained oil above $75 would hurt marketing margins for refiners and pressure the rupee.' Public-sector oil firms such as Hindustan Petroleum and Bharat Petroleum could see earnings volatility, Sen said, though valuations may remain attractive on longer horizons. Meanwhile, energy analysts say Gulf producers like Saudi Arabia and the UAE have every reason to keep the situation from spiraling. Both are in the middle of multiyear economic overhauls that depend on regional stability, not a war that shocks oil markets and freezes capital flows. For now, oil traders are pricing fear, not fallout. But with every new headline from Tehran or Tel Aviv, the $150 scenario inches a little closer from the outer rim of possibility into something more plausible. It's still a hedge. But it's no longer a fantasy. Also read | Crude oil prices could spike to $120, warns J.P. Morgan. Explained in 6 key points ( Disclaimer : Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
New York Times
6 days ago
- Business
- New York Times
Iran's Vital Oil Industry Is Vulnerable in an Escalating Conflict
The conflict between Israel and Iran appeared to be spreading on Saturday to Iran's energy infrastructure, raising fears about energy supplies from the Middle East. Iran's oil ministry blamed Israeli drones for attacking part of the South Pars natural gas field, one of the world's largest, and a refinery, causing fires at both. It is not clear how far Israel intends to go in attacking Iran's energy facilities, a crucial source of export cash for the country as well as domestic energy that looks particularly vulnerable. Other Iranian installations are at risk, analysts say. 'There is one clear target that would make it very easy if Israel or the United States wanted to impact Iran's oil exports,' Homayoun Falakshahi, senior analyst for crude oil at Kpler, a research firm, said during a webinar on Friday. 'And this is Kharg Island.' Nearly all of Iran's oil exports leave from tankers at berths around Kharg Island, a small coral land mass in the northern part of the Persian Gulf off the Iranian coast, potentially making it a target in a protracted war, analysts say. Iran has been developing another terminal in Jask, a coastal city just outside the Strait of Hormuz on the Gulf of Oman, but its capacity appears to be limited, Mr. Falakshahi said. Want all of The Times? Subscribe.
New York Times
03-05-2025
- Business
- New York Times
Oil Prices Are Falling. Here's Where That Could Spell Trouble.
Oil producing countries are bracing for a bumpy ride this year, with a precipitous drop in prices to the lowest levels in four years seen as the initial, alarming sign of looming turmoil. A price drop benefits any country seeking to cut its fuel bill. But in oil producing nations, lower prices can feed economic troubles, and sometimes political unrest, as governments slash spending. Analysts who had already been predicting lower oil prices because of softening demand amid increased global production said the possibility of a tariff trade war and the overall climate of uncertainty could well deepen producers' woes. 'The steep price dive and overall volatility is sending a very strong signal that the global economy is going to be rattled this year and that will translate into a lower demand for oil,' said Gregory Brew, a specialist on the geopolitics of oil and gas with the Eurasia Group, a New York-based risk analysis organization. Wealthy producers may be able to cushion the blow Earlier this year, the price for benchmark crude held steady around $73 a barrel, high enough to sustain the budgets of most producing nations. But some countries, like Saudi Arabia and the United Arab Emirates, base ambitious development plans on a price of at least $90 a barrel, analysts say. Saudi Arabia and the United Arab Emirates have earmarked hundreds of billions of dollars for giant projects to try to diversify their economies away from oil. Although Saudi Arabia pays for its Vision 2030 development program outside its annual budget, the huge, futuristic city project, Neom, depends on oil revenues. To maintain those plans amid lower prices, these richer Gulf nations either have to draw money from their gargantuan reserve funds or borrow, analysts said. Saudi Arabia, the U.A.E. and Kuwait all have easy access to international credit, and can sustain that for years with citizens unlikely to feel the effects, analysts said. A different story for Iran and Iraq In Iran, international sanctions have whittled its oil customers down. There's China, but its demand for oil has slackened markedly amid an economic slowdown. And there are small independent refineries vulnerable to secondary sanctions, which the United States has imposed against two of them in recent months. To attract buyers, Iran will quite likely have to offer steep discounts, analysts said. Iran is negotiating with Washington over the future of its nuclear program; any agreement could bring sanctions relief. But that is unlikely this year. Iran also faces increasing pressure to cut spending by lowering its domestic energy subsidies. When it did that in 2019, antigovernment riots erupted and were put down with force. 'Keeping energy prices very low is extremely important because they know that if they don't, then they are at a relatively high risk of uprisings, riots and demonstrations,' said Homayoun Falakshahi, an analyst at the research firm Kpler. Next door, Iraq depends on oil for an estimated 80 percent of government revenue, so a drop in price would force it to take measures like not paying public sector salaries for chunks of time, a step sure to create domestic discontent. Since the country is not under sanctions, it too can borrow internationally to cover its bills, although that is costly. Vulnerability in Libya, Nigeria and Venezuela Libya's two governments each hold a different half of the country. One runs the bank that takes in oil payments from abroad and the other controls the oil fields. Any price drop would likely ratchet up tensions between the two as they jockey over the revenue, analysts said. Nigeria's economy remains terribly vulnerable to a drop in oil revenue, on which it depends to help subsidize energy prices. A new, almost completed private refinery could mitigate the kind of fuel supply problems that can spark political unrest. Aside from Iran, the other global producer most exposed to price volatility is Venezuela, whose economy collapsed during the drop in prices in 2014-15. Public sector businesses and a bloated government payroll were so dependent on high oil prices that when they collapsed, analysts said, the ensuing economic problems sparked widespread protests that the government put down violently. Help from Russia and Iran has helped leaven the potential fallout this time around, since increased production and refinery capacity mean Venezuela is unlikely to face the kind of fuel shortages that caused widespread blackouts and fueled public anger. And then, there's Russia In Russia, about one third of the federal budget, predicated on about $70 a barrel for oil, comes from energy revenues. With sanctions, Russia discounts its oil by about $10 a barrel; a $60 price matches the price cap imposed in 2022 after it invaded Ukraine. Robust oil and gas sales, especially to China and India, have helped insulate ordinary Russians from much economic fallout from the war. The Kremlin has already eaten into its reserve funds, however, and a further price drop would make paying for the war, and everything else, challenging. Moscow probably still has enough cash reserves to muddle through, but in the short term, there could be pain, analysts said.
