Analyst Brief: Iran Update – 9th April – 09:00 CET – Circus ad infinitum

Cross-Barrel Analyst Brief: Iran Update – 9th April – 09:00 CET – Circus ad infinitum

• Day 1 of the ceasefire wasn’t a success on many fronts. Traffic on the Strait didn’t change and why should it? Owners won’t try anything on safety grounds with the IRGC continuing to make threatening statements. What’s more, the IRGC published navigational advisories, and maps, to help commercial vessels avoid sea mines deployed in the channel.
• True or not, given the long timeline to give the all clear on mines even under peaceful circumstances, we remain really only with one option in the short-term to get oil flowing. That is that the US, having now very little leverage to re-open it by force, “concedes control” to Iran and the toll booth system gets going in earnest. A victory may be pronounced if this is a “joint venture”. But we are clearly talking at least another 4 weeks of very reduced Hormuz flow, with rising chances for a much longer period of low flow. And that is theoretical flow, before talking logistical challenges of getting ships into the Gulf to load and clear tanks tops, allowing the long process of restarts at well-heads and refineries to begin.
• Vessel owners will surely be wary of war breaking out again for some time (i.e. subject to actions and statements over the next 2 weeks), and will face having to make financial payments to a designated/sanctioned terrorist organisation. Pressure to ease sanctions policies on Iran at least on this narrow subject will also rise.
• There are unconfirmed reports doing the rounds that there are large fires at or near the Saudi crude processing facility at Abqaiq. Certainly, there were confirmed attacks along the E/W pipeline system yesterday. This is clearly bad news for the main re-route option currently in play which is ultimately the some 4 MBD out of Yanbu (in addition to Red Sea refinery ops).
• Physical crude markets continue to whizz higher and paper products are beginning to rebound towards the pre-ceasefire setup. For the first time we see in the headlines evidence of oil nationalism in Europe with Galp reportedly due to curb diesel exports to protect local supply. Expect more of this over time.
• Also – what does the oil price need to do? There is so much supply at stake, governments will be forced increasingly to step in to ration/manage in various ways. This is ‘easier’ done in non-OECD countries but in Europe it may also be necessary. Flat gasoil around $200/b may already be doing enough on the price side given the above. Crude futures will be subject to shenanigans for some time, though we think still that risk will need to build on average over the coming weeks.

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