As of 10:08 a.m., March Brent oil futures were trading at $79.24 per barrel (+2.36%). February futures contracts of WTI oil increased by 2.32% to $73.69 per barrel. This is evidenced by ICE trade data. As of 12:49, Brent’s barrel was worth $79.33 and WTI was worth $73.92.
Bloomberg agency reportedIt was stated that oil prices increased due to fears that there would be further disruptions in transportation and that the conflict could turn into a “larger regional conflagration”. Geopolitical risks for oil markets are rising as the Houthis vow to continue attacks on shipping. According to UBS AG analyst Giovanni Staunovo, the increase in black gold prices is due to the perception of recent events as an escalation of the conflict.
Pros for Russia
Igor Yushkov, a leading analyst at the National Energy Security Fund, expects tensions in the Middle East to continue rising.
“This could lead to more foreign oil ships plying around Africa. Logistics costs will increase, including the cost of tanker rental, which is included in oil prices. Tankers carrying fuel by sea were never fired upon.
Russian oil is mostly transported from West to East via Yemen. It is also sent to India via the Suez Canal. The Russian Federation has some agreements with Iran. And probably Moscow will reach an agreement with Tehran to coordinate the situation with Yemen and ensure that Russian ships are not damaged.
The expert believes that, unlike foreign ships, our ships will most likely not change course until the last minute.
According to him, Russia will begin to adjust the oil transportation route “only if it completely screws up.”
“Our oil is transported by the shadow fleet. There are also certain political guarantees to maintain security,” the analyst explained.
He added that in the reverse direction (from East to West, via Yemen), oil from Middle Eastern producers such as Iraq, Saudi Arabia and Kuwait, as well as oil products produced from Russian oil from India, are transported by sea. Yushkov admitted that these countries will be forced to change course.
“It would be an ideal situation for Russia if we do not change course and other countries adjust the course. Their costs will increase, they will reflect these costs on oil prices, but we will not. “As a result, Russian companies will make more profits,” he said.
In his opinion, the main risk to the oil market is linked to the increasing conflict in the Middle East, including Iran:
“Alarm bells are already ringing. On January 11, Iranian naval forces seized the American oil tanker St Nicholas in the waters of the Gulf of Oman. If Tehran gets involved in a conflict, all oil on the return route, including Iranian oil, will be blocked. And this is already “It is an energy crisis. This is a serious risk that everyone fears and it causes oil prices to rise,” he said.
Candidate of Economic Sciences, Associate Professor of the Department of Economic Theory at the Russian University of Economics, says that Iran’s closing of the Strait of Hormuz would be similar to the sabotage of the Nord Stream in terms of gas supplies to Europe. GV Plekhanova Tatyana Skryl.
“Approximately 70 percent of the oil passing through this strait is exported to Asian countries. In any case, closing the strait will cause an increase in fuel prices in the face of increasing raw material shortages,” he said.
Is oil at $100?
In the base case scenario, Sovcombank chief analyst Mikhail Vasiliev does not expect the conflict to escalate into a full-scale war between the United States and Iran with supply chain disruptions.
“There will be elections in the USA in November and the ruling Democratic Party is not interested in intensifying the conflict. The Biden administration is trying to lower oil and gasoline prices to support the low ratings of the president and the Democratic Party. For this reason, he expects the price of Brent oil to remain in the range of 73-83 dollars per barrel in the coming months.
In his predictions for this year, Vasiliev states the average price of Brent oil as 79 dollars per barrel. Staunovo told Bloomberg that the Brent barrel price will exceed $80 in the coming months. Charu Chanana, market strategist at Saxo Capital Markets Pte, also supported this forecast.
BCS World of Investments stock market expert Evgeniy Mironyuk believes that there will be supply disruptions, but the financial market reaction is currently moderate. According to him, the increase in the cost and timing of oil deliveries is unlikely to return the Brent price to the range of $90-100 per barrel.
“The worst-case scenario will cause heavy damage to the derivatives market.” (Financial instruments based on the price of crude oil, traded on various exchanges around the world and used by investors and traders in settlements)and energy prices could increase significantly. “A less radical development of the conflict allows us to expect another gradual increase in prices of at least $10 per barrel due to supply constraints and negative expectations of market participants,” he said. Russian University of Economics. GV Plekhanova Katerina Volkova.