In New York morning trade WTI and Brent futures are rallying when we looked at a brand hitting $100 earlier in the session.
Now world leaders are scrambling to keep oil flowing and Trump announced a $20 billion plan through the US Development Finance Corporation to provide political risk insurance for ships navigating the Persian Gulf, and America is also releasing 172 million barrels of oil from its strategic petroleum reserves.
And this does begin next week and will take up to 120 days to deliver.
Meanwhile, the IEA announced the largest emergency oil release in its history, unlocking 400 million barrels in a bid to stabilize prices and that the supply disruptions, and the G7 is also holding firm on Russia.
French President Macron confirmed that the Middle East turmoil does not warrant the removal of sanctions against Moscow.
Well joining me this morning to weigh in is Janiv Shah, Vice President at Rystad Energy.
Good morning and good afternoon to you.
Thank you so much for joining me for the market seemingly pricing in hopes of a potential resolution to the conflict in the Middle East, but based on what you're seeing right now in oil prices, how long do you think this conflict could potentially continuing and how are you actually pricing in the geopolitical risks of the war.
Good, uh, good morning, good afternoon all.
Thanks for having me on.
I think it's a very, uh, charged, charged situation right now, very volatile, and the market is looking for some clear direction, but the clear direction seems to be coming all from the geopolitical risk and the upside potential that that has provided in the last, let's say 24 hours.
Yes, there has been the notes of the 400 million barrels worth of stockpile released from the IEA nations, but that's uh essentially a drop in the water and the real key factor for bringing prices.
Do will solely be upon how quickly the Strait of Hormuz reopens because there's no real, let's say, um, alternative to the 20 million barrels a day of crude and products that has been able to export or hasn't rather been able to be exported from the, from the, from the strait.
So yes, in terms of geopolitical risk, it all rests upon how quickly the infrastructure and the oil space within the region continues to get hit or again doesn't.
And we continue to hear announcements coming out from global organizations including the G7, IEA, and even from the US and individual nation states.
But given that 20% of global petroleum consumption does rely on that choke point of the Strait of Hormuz, how long can the market actually hold out before we continue to see actual physical shortages?
I mean, physical shortages have already arrived.
We're looking at Asian systems reporting significant losses and straightway reducing their refinery runs.
So the run cuts are essentially a back pressure upon the lack of crude being able to enter for an extended period of time and the lack of requirement to draw from stocks.
Couple that with the reduction or the curtailment of the product exports from this type of a market or a situation.
Only puts the market in a lot more strain and pressure, especially from the products angle, where their stocks are globally low.
So coming into the European space, it's going to last for quite some time, many months we would say, because of the exposed situation that Europe sits in from an importing angle. and when we're talking about risks that it is important to think about insurance and now Trump does want to use the US Development Finance Corporation to provide political risk insurance for ships in the Gulf.
But how is this running counter to market realities and what would you say are the roadblocks preventing this idea from actually working for global shipping lines.
Well, I mean, the US administration had previously announced that they were going to assist uh vessels being transiting through the strait, but the market really didn't take to that news, and we have not seen essentially vessels transiting through the Strait of Hormuz thereafter.
From an insurance perspective, yes, there's been a real evacuation from that angle because there's too much risk at play and, you know, even this morning a few hours ago, two Iraqi vessels that were moored were attacked and essentially damaged heavily.
So it looks like there's a significant escalation within the last period, within the last session.
And now insurance may not even return for let's say maybe until the end of this week or beyond, but again, this all depends upon how much conflict continues to escalate in the region.
And on this Thursday morning we're continuing to keep our eyes on historic intraday volatility when it comes to oil.
So first let us know where you're actually pegging the floor as well as ceiling for crude in the near term.
And of course we're hearing that word stagflation and that is going to affect global central banks, not to mention asset classes.
So how are you factoring in risk for the new term as well as the rest of 2026.
Well, I think that's a very interesting question on the, where, where's the floor in the oil market, and I think previous, let's say mid-February or thereabouts before this war, you know, the general market consensus was looking at the floor around $55 to $60 on rents and let's say $5 discount on, on WTI.
But sat where we're sat right now, I think the real flaw in the absolute short term is probably around $80 to $85 and that is considering a significant de-risking and de-escalation within this space because the lingering effects from the lack of transit of vessels is also putting a back pressure on supply assets within the region, so.
I think that's where, that's where we put the, the market sentiment for now, but of course, there is a significant upside, uh, from this current point onwards, you know, Brent said what, $100 right now, and so it's just retouched this triple, triple digit dollar.
Well, Janiv, we will have to leave it there for today, but thank you so much for joining us.
We appreciate your time and all of your insights.
Appreciate it.
Thank you so much.
