Increased volatility in the oil market; The G7 decision??

Crude oil futures prices approached $120 a barrel on foreign markets yesterday morning as the war in Iran intensified, threatening oil production and shipping in the Middle East.

According to the AP news agency, the price of a barrel of European Brent crude oil rose to $119.50 early yesterday, but later lost ground. The price of US West Texas Intermediate crude oil also reached $119.48 a barrel, but later returned below $100. The level of almost $120/barrel has not been reached since 2022.

West Texas Intermediate (WTI) crude for April delivery was at $96.02 a barrel on the New York Mercantile Exchange at 11:24 a.m. local time, up 5.6% from Friday's session, while Brent crude for May delivery was at $98.68/barrel, up 6.5%.

Qatar's energy minister said on Friday, quoted by the Financial Times, that the price of crude could rise to $150/barrel in two to three weeks if oil tankers and other commercial ships are unable to pass through the Strait of Hormuz.

In the current context, Michael Every, an analyst at Rabobank, says: "The longer the conflict lasts, the greater the damage will be, in a domino effect, after developments in the oil market last week indicated that the situation could worsen.”

Major increases in the oil market in the early part of yesterday came after an attack launched by Iran on a refinery in Bahrain. In this context, the state-owned energy company Bapco Energies in Bahrain declared force majeure on its operations. The increase was later moderated, in the context of the meeting of leaders of the Group of Seven industrialized nations (G7), in order to analyze the situation.

French President Emmanuel Macron said yesterday, before the meeting, that "the use of strategic reserves is an option considered” by the G7, but following the meeting, the group's representatives did not make a decision in this regard. France currently holds the rotating presidency of the G7.

French Finance Minister Roland Lescure said yesterday that the G7 countries had not yet made a decision on the possible release of emergency oil stocks. "We are not there yet,” Lescure said, quoted by Reuters, noting: "What we have agreed is to use whatever tools are necessary, if necessary, to stabilize the market, including the potential release of stocks.” Roland Lescure also said that such a measure, if it proves necessary, "can only be effective if it is implemented in a coordinated way.”

Lescure stressed that governments are closely monitoring the situation, and there are currently no oil supply problems in Europe or the United States.

• Japan - possible release of oil from reserves

The Japanese government has asked a national oil storage facility to prepare for a possible release of oil from strategic reserves, amid reduced supplies from the Middle East, a Japanese lawmaker said on Sunday, quoted by Reuters, according to news.ro.

Akira Nagatsuma, a member of the opposition Centrist Reform Alliance party, said an official from the Japan Metals and Energy Security Organization at the national oil storage facility in Shibushi told him that the facility had received instructions to prepare from the Natural Resources and Energy Agency on Friday.

The timing of a possible release of oil from the reserves is not yet clear, Nagatsuma said. It is also not known whether other storage facilities have received the same instruction.

An official from the energy agency, which is subordinate to the Ministry of Economy, declined to comment on the information. Representatives from the Shibushi base were not immediately available for comment.

The Shibushi base, located in southern Japan, is one of the places where the country's strategic oil reserves are stored.

Japan depends on the Middle East for about 95% of its crude imports, and about 70% of that is transported through the Strait of Hormuz, a route that has been virtually blocked after the United States and Israel attacked Iran.

Japan holds emergency oil reserves equivalent to about 254 days of domestic consumption, one of the largest in the world. They include state-owned stocks, private company reserves and stocks shared with oil-producing countries. Tokyo last drew on these reserves in 2022, as part of a release coordinated by the International Energy Agency after Russia's invasion of Ukraine.

• European gas prices rise

European gas prices rose by around 30% yesterday morning, following the rise in oil prices, but the advance was moderated afterwards. The price of the gas futures contract at the Amsterdam hub (TTF), for delivery in April, considered the European reference, recorded an increase of more than 8% at 15.08 local time, reaching 55.96 euros per megawatt-hour.

Yesterday's level is a far cry from the one reached in 2022, at the beginning of the war in Ukraine, when it exceeded 300 euros.

• Coface: "Energy in the spotlight, risks on the horizon”

The military escalation between the United States, Israel and Iran is putting extreme pressure on energy markets, say Coface specialists, noting that while no major supply disruptions have yet been reported, the risks linked to the Strait of Hormuz pose a threat to the global economy if this conflict continues.

Ruben Nizard, head of sectoral research at Coface, says: "A conflict limited to a few days or weeks - the most likely scenario at present - should have a limited impact. However, if the conflict were to continue, its macroeconomic impact could be significant and could go beyond the issue of energy prices.”

According to Coface, the main current risk is the Strait of Hormuz, through which about 20% of the world's oil consumption and almost 30% of maritime crude oil transports transit. The current disruptions are already leading to price increases. The capacity to bypass this strait is limited and insufficient to absorb a major shock.

"Prolonged or repeated disruptions could push the price of Brent oil into triple digits, with the possibility of exceeding the February 2022 high ($122/barrel) or even the 2008 record ($147/barrel),” according to Coface.

According to the cited source, "the conflict in the Middle East is generating strong contagion effects on the Romanian economy, the main transmission channel being the vulnerability of the energy market. The shocks are felt at the macroeconomic and sectoral level, directly influencing price stability, interest rates, economic growth and security of supply.”