Latest news with #RoryJohnston
Politico
11 hours ago
- Business
- Politico
How the Israel-Iran conflict could hit the economy
Presented by As the U.S. weighs intervention in Israel's conflict with Iran, Wall Street has been skittish, eyeing the potential fallout for oil prices and inflation. To get a better sense of what's driving the oil market and what economic risks might lie ahead, MM caught up with Rory Johnston, an oil market analyst at research service Commodity Context who's been following all of this closely. A takeaway from that conversation: The price jump has been notably large for a market that has become desensitized to political risks after safely weathering multiple shocks over the last few years, including Covid and the Russia-Ukraine war. Now, 'even a numb cynical oil market sees Israel bombing Tehran and says, 'OK, maybe worry a bit here,'' he said. Conflict with Iran is the 'No. 1 risk scenario that people talk about, and now we're living in it,' he added. A worst-case scenario would be if Tehran is driven to close off the Strait of Hormuz, a channel through which about a fifth of the world's oil passes. Experts including Johnston say it's unlikely Iran would do that unless pushed to the brink — such a move would run the risk of hurting its own economic lifeline, as well as antagonizing its neighbors in the region — but the shockwaves would be significant. For now, what struck your host is that this conflict is helping prop up prices at a time when they'd really started to drop, and that could help boost U.S. oil production, which had previously been forecast to contract in 2026. But the exact trajectory of all this is highly unclear. 'This is usually the lead-up to summer driving season, so gasoline prices were set to rise anyway,' POLITICO's resident oil market expert Ben Lefebvre told MM. 'Because of the current Middle East situation, they'll rise further than they might have when oil was still around $60 a barrel. But when compared to what U.S. drivers experienced even last year, it won't be too far off recent norms … if there is such a thing as 'recent norms.'' 'The interesting thing is whether this spurs U.S. oil companies to drill more,' he added. 'They might just see this as a temporary boost and not something they want to get too far ahead of.' Rewind to before the current Israel-Iran conflict escalated. OPEC, the cartel of major oil-exporting countries, had been holding back production but then ramped up output earlier this year. That move was taken, in part, to get ahead of the effects of President Donald Trump's tariffs, which had raised fears that demand for oil would crater amid a global slowdown. That was leading to forecasts of oversupply later this year, Johnston said, reducing incentives for oil companies to produce. Now, Israel's attacks on Iran have likely led to fear-buying, as well as speculative trading, that has pushed up prices as much as 15 percent. Fighting so far has spared infrastructure that would significantly crimp the outflow of crude. 'While theoretically on its face, nothing that's happened so far has changed anything physical about supply and demand, part of the way … price formation has occurred is you have physical participants — a refinery, whatever — that's all of a sudden worried they're not going to be able to get cargos next month or the month after,' Johnston said. For prices to stay high or go higher, there likely would have to be some actual damage to key oil infrastructure, he said. But in the meantime, the scope for economic disruption is still significant. The largest price increases have been for diesel, a key input for shipping and therefore a potential risk to inflation in many sectors. 'It might not seem as harsh at the pump, but your shipping and your route delivery is going to feel the pinch of diesel far more,' Johnston said. More broadly, John Fagan, co-founder of Markets Policy Partners and the former markets head at the Treasury Department, said this oil price shock feeds the narrative that the U.S. is going to have slower growth and higher prices: stagflation. 'Demand is not collapsing, and oil prices are not unbelievably high, so you don't have that pop and drop kind of dynamic' when prices rise above where the market can support, he said. 'And if the dollar can't rally, that's supportive of [higher] oil prices.' HAPPY FRIDAY — Hope many of you got to have a restful day off yesterday. Send thoughts about the economic outlook to vguida@ and as always, send MM tips and pitches to Sam Sutton, who is back next week: ssutton@ Driving the day Deputy Treasury Secretary Michael Faulkender speaks at the Council on Foreign Relations at 12:30 p.m. Debt warnings fall on deaf ears — Republicans are largely ignoring a host of reports warning that their bill would worsen the nation's fiscal trajectory in a serious way, our Ben Guggenheim reports. The Congressional Budget Office estimates Tuesday led to an unusual finding. Usually tax cuts tend to cost less under so-called dynamic scores that include economic effects. Not so here: The $2.8 trillion figure released Tuesday outstripped the CBO's prior $2.4 trillion estimate that did not include economic analysis — mostly because the bill would increase interest rates. But the GOP is relying instead on estimates from the White House that Kyle Pomerleau of the American Enterprise Institute called 'outrageous' and 'way higher than everyone else's.' Your MM host chatted last week with Joe Lavorgna, who joined the Treasury Department this month as a counselor to Secretary Scott Bessent, and he had thoughts on CBO's projection that the economy would grow at an average rate of 1.8 percent over the next 10 years. 'Once the One Big Beautiful Bill passes, it's going to lock in the gains that we saw in the first Trump administration, when we were growing at nearly 3 percent,' he told your MM host. 'Then, you could make a case because of AI,' productivity growth will be much higher. 'The trailing 10-year growth rate of GDP is 2.5 percent. Why aren't we using that? .. 1.8 is unbelievably pathetically slow.' On the pods: Hear from CBO Director Phillip Swagel himself on Bloomberg's Big Take podcast. Sober news on entitlements — The longterm financial health of Social Security and Medicare worsened last year, our Michael Stratford reports. 'Annual reports released by the Treasury Department on Monday show that Social Security's reserve funds, if combined, would run out of money to fully pay beneficiaries in 2034 — a year sooner than projected last year,' Stratford writes. 'And the trust fund that pays Medicare's hospital bills would be depleted in 2033 — three years earlier than expected.' Trump calls for 'clean' Senate crypto bill to pass — Late Wednesday, Trump called on House Republicans to move 'LIGHTNING FAST' to send Senate-passed stablecoin legislation to his desk, dialing up pressure on GOP lawmakers in the lower chamber to adopt the measure without any changes, our Jasper Goodman reports. The Economy ICYMI: Fed holds rates steady — Federal Reserve officials announced Wednesday that they will hold interest rates steady, ignoring repeated calls from President Donald Trump to dramatically lower borrowing costs. In fact, projections from the central bank's policymakers suggest they're less confident they will be able to significantly decrease rates than they were in March. Vibe check: Here was Trump's response on Truth Social Thursday morning: ''Too Late' Jerome Powell is costing our Country Hundreds of Billions of Dollars. He is truly one of the dumbest, and most destructive, people in Government, and the Fed Board is complicit. Europe has had 10 cuts, we have had none. We should be 2.5 Points lower, and save $BILLIONS on all of Biden's Short Term Debt. We have LOW inflation! TOO LATE's an American Disgrace!' Jobs report Carolyn Davis is now director of comms at Better Markets. She previously was director of external comms at Leadership for Educational Equity. Mike Spratt has joined the ICI as an associate general counsel. He previously was assistant director in the Division of Investment Management Disclosure Review office at the SEC. He also served as counsel to former SEC Commissioners Kara Stein and Elisse Walter.
CNA
4 days ago
- Business
- CNA
Oil prices fall $1 per barrel on reports Iran seeks truce with Israel
NEW YORK: Oil prices slipped US$1 per barrel on Monday (Jun 16) in volatile trading after reports that Iran is seeking an end to hostilities with Israel, raising the possibility of a truce and easing fears of a disruption to crude supplies from the region. Brent crude futures settled US$1, or 1.35 percent, lower to US$73.23 a barrel. US West Texas Intermediate crude futures fell US$1.21, or 1.66 percent, to US$71.77 per barrel. Iran has asked Qatar, Saudi Arabia and Oman to press US President Donald Trump to use his influence on Israel for an immediate ceasefire in return for Tehran's flexibility in talks about its nuclear program, two Iranian and three regional sources told Reuters. Earlier, the Wall Street Journal had reported Iran was seeking a truce. Traders pared bets that bombing by both sides could turn into a broader, regional war that would threaten energy infrastructure, Mizuho analyst Robert Yawger said. On Friday, oil prices surged more than 7 percent after Israel began bombing Iran over claims Tehran was close to securing an atomic bomb. Friday's surge put oil in "overbought territory" in terms of technical indicators, which is typically followed by a downward move, said Rory Johnston, an energy analyst and founder of the Commodity Context newsletter. "As I see it, the initial run up in prices on Thursday/Friday was fueled by a large inflow of speculative cash, which brought us back into overbought spec positioning levels," Johnston said. "When you're in that state, the market is especially vulnerable to sharp liquidations," Johnston added. Both Israel and Iran have traded airstrikes, including on energy infrastructure, but key oil export facilities have not yet been hit. "The Israelis have not touched Kharg Island, so that is the story right now," Mizuho's Yawger said, referring to the Iranian oil export hub. Yawger said any strikes on Kharg Island would likely send oil prices soaring to US$90 a barrel. "It all boils down to how the conflict escalates around energy flows," said Harry Tchilinguirian, group head of research at Onyx Capital Group. "So far, production capacity and export capacity have been spared and there hasn't been any effort on the part of Iran to impair flows through the Strait of Hormuz." Electronic interference with commercial ship navigation systems has surged in recent days around the Strait of Hormuz and the wider Gulf, which is having an impact on vessels sailing through the region, naval forces said on Monday. About a fifth of the world's total oil consumption, or some 18 to 19 million barrels per day of oil, condensate and fuel, passes through the strait. Iran, a member of the Organization of the Petroleum Exporting Countries, currently produces around 3.3 million bpd and exports more than 2 million bpd of oil and fuel. The spare capacity of OPEC+ oil producers to pump more to offset any disruption is roughly equivalent to Iran's output, according to analysts and OPEC watchers.
Edmonton Journal
4 days ago
- Business
- Edmonton Journal
Varcoe: Energy talks at G7 summit under shadow of Middle East conflict as oil prices 'to spike higher'
Article content Analysts anticipate prices will climb higher in the coming days. 'I do expect prices to spike higher again . . . High $70s, low $80s for Brent (crude) is back in play,' commodity economist Rory Johnston, founder of the Commodity Context newsletter, said Sunday. 'This is the latest in a series of previously unthinkable developments that have eroded energy security across the board.' Building energy security is one of the key themes Prime Minister Mark Carney, as G7 host, has set on the summit's agenda, although it's been a perennial issue discussed by the group over five decades of annual meetings.
Axios
11-06-2025
- Business
- Axios
Projected crude-oil dip undercuts "drill baby drill" symbolism
Fresh projections add weight to a problem for President Trump's "drill baby drill" push — many companies won't follow along in this price and tariff landscape. The big picture: A revised outlook from DOE's independent stats arm shows U.S. crude output sliding in the second half of 2025, and a small year-over-year drop in 2026. It would be the first annual decline since COVID battered demand in 2020-2021. Why it matters: Yes, the revisions are small and yes, the U.S. remains by far the world's top producer. But the symbolism is big as the White House promotes its "energy dominance" agenda. State of play: The Energy Information Administration yesterday estimated that U.S. output will dip 0.3% to average 13.37 million barrels per day in 2026. It's the latest in several downward revisions this year, but the first that sees a decline — last month's version still estimated a very small rise over 2025. Driving the news: EIA cited a steeper-than-expected drop in active rigs, adding "we forecast U.S. operators will drill and complete fewer wells through 2026." S&P Global Commodity Insights goes further, projecting that 2026 will slide to an average of just under 13 mbd. The intrigue: Onshore shale is the biggest part of U.S. output. One big question is whether a total U.S. production decline next year would be a blip or an inflection point — at least without far higher prices on a sustained basis. Remember that in early May, the CEO of Permian Basin heavyweight Diamondback Energy told shareholders that onshore U.S. production has likely peaked. What they're saying: "It's peak shale at this price," oil analyst Rory Johnston, founder of Commodity Context, tells Axios. "This is not a geological or kind of a fatalistic peak, but rather an economic one," he said in an interview. The current prices and cost structure, especially with tariffs pushing costs up, "is not conducive to profitability for these firms, so they're going to start pulling back." Yes, but: Lots of caveats here. One is that Trump's "dominance" agenda isn't only about crude, but rather LNG and more.
CNA
26-05-2025
- Business
- CNA
Oil holds steady; market awaits clarity on OPEC+ next move
CALGARY :Oil prices held steady on Monday with news that eight OPEC+ countries, who had pledged extra voluntary oil output cuts, will now meet on May 31, a day earlier than previously planned. Brent crude futures settled down four cents at $64.74 a barrel, while U.S. West Texas Intermediate crude last traded at $61.53 a barrel, unchanged from the prior day's session. Trading volumes were light due to the U.S. Memorial Day holiday. Three OPEC+ sources told Reuters on Monday about the change of meeting date. The meeting will likely decide on July output, which sources have previously told Reuters will entail another 411,000 barrels per day of production increase. The meeting is separate from the online ministerial meeting of the Organization of the Petroleum Exporting Countries and its allies, led by Russia, set for May 28. Russian Prime Minister Alexander Novak said on Monday that OPEC+ has not yet discussed hiking output by another 411,000 barrels per day ahead of its meeting, RIA news agency reported. "At this stage, it feels like the market is exhausted with this," said Rory Johnston, a Toronto-based analyst and founder of the Commodity Context newsletter, adding investors and traders are still anticipating the arrival of additional OPEC barrels but are disinclined to react significantly until something material emerges. OPEC oil output edged lower in April despite a scheduled output hike taking effect, Johnston pointed out, which added to the overall market hesitancy. "It feels like (OPEC) really wants to have headlines every couple of days," Johnston said. "But the market reaction to them at this point is waiting for anything (tangible) to actually show up." Both Brent and WTI had traded higher earlier in Monday's session after U.S. President Donald Trump said he agreed to extend a deadline for trade talks with the European Union until July 9, marking another temporary trade policy reprieve. The extension eased concerns that U.S. tariffs on the EU could hit fuel demand. Global markets climbed on Monday and the euro rallied. "Trump's pivot, by postponing higher tariffs for the EU, and his comments on possible sanctions on Russia are moderately supporting crude prices today," UBS analyst Giovanni Staunovo said. Trump separately said in a social media post that Russian President Vladimir Putin had "gone absolutely CRAZY" by unleashing the largest aerial attack of the war on Ukraine and that he was weighing new sanctions on Moscow.
