Crude Surges as Tanker Attacks Escalate and Supply Risks Mount

***Long run weekly shown above

Spreading of the conflict is driving prices higher today as nine more oil tankers came under attack overnight / early this morning. BP evacuated staff from Iraqi oil fields and the country overall has cut ~1.3mln bpd of production. The US sank an Iranian warship and attacks across the region continue to cause havoc.

In the Brent contract, spreads have rallied back to June 2022 highs which is telling. In June of 2022, the active WTI contract was up over 120.00 for reference.

European LNG prices are seeing heightened volatility after Qatar’s main LNG export facility was hit by Iran. This morning, Russia’s Putin took the opportunity to threaten complete closure of Russian gas into Europe which spiked prices further.

EU leaders do not handle inflation well – at all. Panicked decisions from the ECB and EU could be coming down the pike. The heightened energy prices will surely slow the economic momentum the EU region was just starting to regain. Unfortunate, as economic momentum was desperately needed within those economies.

Iran has stated they will retaliate “anywhere” for a strike on their naval ship. I’d have to imagine that some type of strike or event targeting the US will be attempted at some point – but these comments could drive some fears. Earlier this week every major city in the US (ex. Fon Du Lac) has posted alerts and warnings to citizens on potential threats.

With Iraq at -1.5mln bpd, tankers stuck in the strait clogging up close to ~2.5-3.3mln bpd, it’s enough to tighten up the balance sheet fairly quickly if the Strait doesn’t get cleared. The striking of civilian merchant ships by Iran will likely lead to NATO getting more aggressive on bombardments – and China has already put out stern warnings on striking their own vessels.

Weekly Technical History:

Monday 2/16- Holding of the 62.57*** level is key today. Risk is still skewed to the upside. Volumes and volatility are likely lighter today on holiday volumes.

Wednesday – Price action was disappointing, but held support at 61.85***. Headlines throughout the day may provide for better entry than this morning, liquidity remains scarce pre US open.

Thursday – Favored profit taking and shaving near 66.04*** level.