Uncertainty on Iran War Drives Oil Up 15%

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

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Summary

Early-week comments that a return to $100 crude oil was on the horizon rang true. Cease-fire announcements were extended, but geopolitical risk remains high.

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$90 Crude Seems Like Only Yesterday

Volatility was on display, with on-again off-again prospects for a lasting cease-fire in the Middle East pushing crude oil prices up 15% on the week.

Industrial Info Resources has been monitoring developments in the Middle East since fighting began with joint U.S.-Israeli airstrikes on Iran on February 28. From refinery impacts, to fertilizers and aluminum, there's a running list of ongoing developments.

For more information, see the Breaking Energy News article Middle East Oil and Gas Assets Impacted by Iran War.

On Friday, the price of Brent crude oil was trading at about $104 per barrel in pre-market movement, relatively unchanged from the prior close. Brent had dropped to about $95 per barrel on word of safe travel through the Strait of Hormuz, but on Monday, noting there's more than 600 million barrels of oil trapped in the Persian Gulf, London oil broker PVM warned that "a renewed price surge significantly above $100 cannot, and should not, be ruled out."

The hot part of the war seems to be over, with only a U.S. naval blockade ongoing in terms of military action. Iran has responded by deploying fast-boat attacks on maritime travel, prompting a response from U.S. President Donald Trump that such boats would be "eliminated" if they continue to interfere.

Against the bombastic rhetoric are ongoing efforts to reach a lasting truce. The Israeli ceasefire with Lebanon was extended and some diplomatic action may be underway in Pakistan, which hosted previous rounds of peace talks.

By the Numbers

• 47% increase in crude oil prices since Iran war began
• 42 fewer U.S. rigs than this time last year

Some Consumer Relief, But Clouds Forming

On the positive side, consumers may be getting some relief now that crude oil prices have moved away from highs above $110 per barrel. Travel club AAA put the national average retail price at $4.03 for a gallon of regular unleaded, down from week-ago levels of $4.09.

"But how long the downward trend will last is uncertain with continued instability along the Strait of Hormuz," economists said.

Elsewhere, representatives from the U.S. energy sector expressed frustration with the conflict, despite the 47% increase in crude oil prices since the war began. On Thursday, the Federal Reserve Bank of Dallas released results from its first-quarter energy survey, finding irritation with the market volatility.

For more information, see the Industrial Info Resources News article Dallas Fed Survey: War Creating Energy Sector Chaos.

"Uncertainty is problematic in the oil and gas business, and this administration is the definition of uncertainty," a respondent from the oil-field services sector said.

Meanwhile, Industrial Info Resources continues to keep track of earnings for the first quarter. Midstream company Kinder Morgan reported first-quarter net income of $976 million, compared with year-ago levels of $717 million. Halliburton reported total North American revenue declined, however, by 4% year-on-year to $2.1 billion, driven largely by a decline in upstream activity.

For more information, see the Industrial Info Resources News articles Kinder Morgan Eyes Texas, Other Gas Hotspots for New Pipelines and Is U.S. Shale Responding to US$90 Crude Oil?.

Upstream services firm Baker Hughes put the total U.S. rig count at 543 last week, down 42 from the same period last year.

Key Takeaways

• Strait of Hormuz blockade ongoing despite cease-fires
• Even with higher oil prices, the mood is darkening

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About Industrial Info Resources
Industrial Info Resources (IIR) 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 verified plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).