Oil's Energy Ceasefire Slide Is A Trap As Three Supply Shocks Collide
The oil market is pricing in a peace that hasn't arrived, and today's drop in crude could prove one of the costliest misreadings of the year as three separate supply shocks - the energy war between Russia and Ukraine, a hurricane tearing through Gulf of Mexico output, and missile strikes on Saudi Arabia - converge on a world already short of energy.
This is the warning from the CEO of deVere GroupAdvertisementWashington declared a similar truce in mid September. Kyiv voiced doubts over Moscow's commitment, strikes on refineries carried on and US diesel climbed above $6 a gallon.
Friday's pledge that Russia will ship more than 4 million tons of diesel to world markets also sits awkwardly beside the export ban Moscow imposed after its own refineries were hit.
Meanwhile, Hurricane Isaias, the first Atlantic hurricane of the season, forced producers to shut in roughly 1.3 million barrels a day ahead of landfall, about 63% of Gulf of Mexico oil output. The offshore Gulf normally supplies around 15% of all US crude.
At the weekend, Houthi missiles hit the airport in Riyadh, capital of the country holding the largest share of the world's spare oil capacity, killing 12 people and injuring more than 300.
Iran's foreign minister has since phoned his Saudi counterpart and offered to help open dialogue between Riyadh and the Houthis, a gesture some traders read as calming.
The deVere CEO also points to the wider economic fallout. Energy is one of the fastest routes from conflict to consumer prices, and central banks are watching closely.
Yet Nigel Green argues the turbulence also carries opportunity for those who prepare.
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