BLOOMBERG - OIL PRICES DO NOT SHOW THE TRUE DEPTH OF THE CRISIS - Filenews 21/3
Brent has risen by about 50% to $110 a barrel as the closure of the Strait of Hormuz and attacks on energy infrastructure in the Middle East constrain supply. However, as it is pointed out, the cost of almost every natural barrel is rising even more, as market tightness pushes higher the prices of products such as gasoline, diesel and jet fuel.
In Asia, which remains the largest oil-consuming region, refineries are buying long-distance cargoes at very high mark-ups relative to Brent in an effort to secure supplies. Bloomberg notes that the real market is under much more pressure than that reflected in futures prices.
Transport companies are already starting to accept the burden of increased fuel costs, while in some regions restrictions have been placed on marine fuel purchases. In aviation, where fuel prices have exceeded $200 a barrel, major European airlines warn that the extra costs will be passed on to passengers.
In the analysis, the divergence between futures and natural oil prices is partly due to US interventions to contain prices, including through emergency reserve releases. Despite these measures, the real burden on the global economy appears greater than that suggested by stock market contracts, intensifying pressure on central bankers and the Trump administration ahead of the November midterm elections.
Bloomberg also points out that the price shock may intensify. Goldman Sachs and Citigroup reported this week that, if the conflict continues, contracts could move to all-time highs in the coming weeks, surpassing the $147.50 recorded in 2008.
These forecasts are based on the possibility of a prolonged disruption in a market that, according to the International Energy Agency, is experiencing the greatest disruption in oil supply on record. Goldman estimates that about 17 million barrels per day traded through the Persian Gulf are affected by the conflict.
Brent has approached $120 twice in the past two weeks, reaching near the highs of the 2022 crisis and increasing pressure on Washington to seek market defuse.
On Thursday, U.S. Treasury Secretary Scott Bessent told Fox Business that, just days after announcing a large release of reserves, the United States could consider a second release of strategic reserves, despite doubts about whether such a move can be sustained.
He then made statements that, according to Bloomberg, took the market by surprise, leaving open the possibility of lifting some sanctions on Iranian oil, despite the fact that the US is at war with Tehran.
Other moves being discussed to control prices include the lifting of sanctions on Russian oil that remains stored on ships, while speculation is mounting among traders about possible US intervention in the futures market, which Besed has denied.
Christof Ruhl, an adviser to Crystol Energy and a former BP economist, told Bloomberg TV that the US has almost exhausted the means at its disposal to stem the rise in prices, estimating that the possibilities for further intervention are now limited.
The signs of pressure are already becoming more apparent in the real economy. In the US, retail prices of gasoline are approaching $4 a gallon, while diesel has exceeded $5. In Germany, a heating oil seller said consumers buy only when absolutely necessary, while airlines have cancelled flights due to skyrocketing fuel costs.
Pavel Kveten, CEO of Girteka Logistics, one of the largest road transport companies in Europe, said that fluctuations in energy markets are passed on almost immediately to the company's operating costs, noting that fuel accounts for about 30% of transport costs.
For the time being, there are no signs of a de-escalation of the crisis, as the conflict is heading towards its fourth week. According to a Bloomberg source, the Iranian authorities do not appear willing to discuss the opening of the Strait of Hormuz, while they are focused on their survival under US and Israeli attacks.
Helima Croft, an analyst at RBC Capital Markets, said there was no substantial relief in sight from the worsening energy crisis as more and more energy installations came under fire.
