In a report sent to Rigzone by the Standard Chartered team late Wednesday, Standard Chartered Bank Energy Research Head Emily Ashford warned that, in the company’s view, “the marked escalation in the U.S.-Iran conflict over the past week puts all energy assets and infrastructure in the region at risk”.
Ashford flagged a “sharp escalation in attacks on energy assets” in the report and highlighted “extensive damage to the Qatari Ras Laffan” facility. In a statement posted on its website on March 20, QatarEnergy said it expects damage to its Ras Laffan Industrial City caused by missile strikes to cost about $20 billion a year in lost revenue and to take up to five years to repair.
“The escalation shook energy markets out of their uneasy comfort level between $100-105 per barrel, with prices rallying on 19 March, peaking just shy of the 9 March high of $119.50 per barrel,” Ashford said in the report.
The Standard Chartered Bank analyst went on to state that “the forward curve remains in a strong backwardation, with the back of the curve anchored at around $72 per barrel, the highest for 43 months”.
In the report, Ashford noted that “the concentration of assets in the Gulf has exposed the vulnerability of supply”.
“Under current circumstances there is no real spare capacity available. We expect every possible mechanism that could dampen prices and increase supply to be at least considered” Ashford added.
“Higher prices for longer will encourage supply growth outside the Gulf, but it will take time,” the Energy Research Head continued. .
Ashford highlighted in the report that, at the time of writing the Standard Chartered Bank publication, “approximately 40 energy assets across the Gulf have been attacked, from the upstream to the downstream”.
In a market comment sent to Rigzone on Friday, Aaron Hill, Chief Market Analyst at FP Markets, highlighted that oil prices finished Thursday “on the front foot, with Brent settling back above $100 per barrel”.
“Commodity traders clearly did not buy into Trump’s de-escalation commentary,” Hill added.
“Brent is currently higher by nearly two percent this morning. Sustained oil prices north of $100 will clearly cement a more volatile market environment,” he continued.
“Essentially, for stocks to gain a footing, oil prices must drop – oil is a fundamental input for crucial industries,” Hill went on to state.
In a comment sent to Rigzone on Wednesday, Neil Crosby, AVP Oil Analytics at Sparta Commodities, said, “if it was hard holding positions last week, this week is proving ridiculous”.
“If you subscribe to the view that any deal this week is doomed and the conflict re-escalates, then it will be worth at some point being exposed to the long side of things for the coming days, with Brent now roughly $100 per barrel,” he added.
“The obvious caveat of course being the price suppression/headline risk that has capped Brent to this level in the first place,” he continued.
In a report sent to Rigzone on Tuesday morning, Skandinaviska Enskilda Banken AB (SEB) Chief Commodities Analyst Bjarne Schieldrop, noted that there were “wild moves yesterday [Monday]” in the oil market.
“Brent crude traded to a high of $114.43 per barrel and a low of $96.0 per barrel and closed at $99.94 per barrel yesterday,” Schieldrop pointed out.
EY-Parthenon Chief Economist Gregory Daco said in a statement sent to Rigzone late Monday that “this is not a textbook oil shock; it is a multidimensional disruption”.
In a commodity note sent to Rigzone last Friday, Ole Hansen, Saxo Bank’s Head of Commodity Strategy, stated that “the nature of the energy shock is evolving”.
“What began as a supply disruption risk centered on the Strait of Hormuz has developed into a more complex and persistent challenge involving damaged infrastructure, disrupted trade flows and with that rising macroeconomic headwinds,” he added.
To contact the author, email
