Commodity Rally Pauses on Trump's Insurance Proposal

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Written by Daniel Graeber for IIR Energy Intelligence (Sugar Land, Texas)

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Crude oil prices moderated on Wednesday after the U.S. government floated the idea of backing insurance for Persian Gulf shippers, though the lull may be short-lived.

Brent crude oil, the global benchmark for the price of oil, was up about 1% pre-market on Wednesday to trade near $82.25 per barrel. It rallied as much as 7.2% on Monday after military action from the U.S. and Israel on Iran spread throughout the Middle East.

The pause in the rally followed a pledge from U.S. President Donald Trump to provide insurance and military escorts to vessels traversing the Persian Gulf and the Straits of Hormuz, strategic waters that carry about 20% of the world's waterborne crude oil.

"No matter what, the United States will ensure the free flow of energy to the world," he said on social media.

Strong rallies rarely last. Markets in late September 2019 spiked sharply after Iran hit energy facilities in Saudi Arabia, only to see the gains erased less than a month later. Nevertheless, protracted conflict involving many of the world's major energy producers could create a higher-for-longer scenario.

RBC Capital Markets on Wednesday said outages are mounting, with Iraq shutting in about 1.5 million barrels per day (BBL/d) in production because it's running out of storage.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Project and Plant databases can learn more about Iraqi storage facilities--including capacities, investment values and necessary equipment--in this detailed list.

Elsewhere, natural gas markets are still under pressure after QatarEnergy, one of the largest gas producers in the world, said it was shuttering production due to the war. That's causing a supply-side squeeze overseas, pushing the Dutch Title Transfer Facility (TTF), the European benchmark for the price of wholesale natural gas, up some 60% over the first two trading days of the week.

But like Brent, the rally fizzled. TTF was trading at 8% below Tuesday's close to move below $50 per million British thermal units.

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About Industrial Info Resources
Industrial Info Resources (IIR News Intelligence) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 250,000 current and future projects worth $30.2 trillion (USD).