Oil Soars Above $100 as Iran War Forces Saudi Production Cuts

So for years, Iran and Qatar have developed a cordial relationship, strategic relationship based on pragmatism, because they share a large field, the world's largest gas fields. And in order to produce this field, the need to have coordination, joint management. So there is an intense confidential agreement between Iran and Qatar to develop this field. Now that we have this conflict ongoing, not only addresses new uncertainties for the expansion of Qatar LNG, which is ongoing, and the world is expecting it with anticipation to get cooler prices in two years from now. And at the same time, we have this uncertainty because nobody knows what comes next in Iran and whether the new future Iranian government will honor this arrangement that govern the joint field. I want to ask a question I haven't really heard a lot of people ask, and that is, are the oil markets overreacting? And I ask that because now oil is a much smaller part of GDP than it was a few decades ago when we had the energy crisis of the 1970s. And also, the U.S. is the world's largest oil producer. So why why are we seeing the reaction or maybe we should be seeing a more aggressive reaction. But I'm asking you, the expert. So over the last summer, when we already had the 12 day war, we had the spike in prices and then prices revert back rapidly. The duration of the conflict really impacts how long. We'll see how your prices on oil. There are mitigation strategies that are going to be developed first. Even the U.S. government right now announced a shipping like re-insurance for Maritain because right now the problem is the Strait of Hormuz for oil. That's the biggest problem as well as the heating of infrastructure are strikes on infrastructure, oil infrastructure. But the transits of the Strait of Hormuz is a big, you know, handicap right now for trade. And if between escorts plus and there are, you know, insurance because the war premiums are through the roof and nobody can travel. What about pipelines? I mean, I mean, the answer is I know that in Qatar there's the dolphin pipeline, which is, you know, the basic pipeline. But there's all sorts of pipelines that haven't been built in this war for whatever reason, the catalyst for that area to grow up and put in a pipeline infrastructure. That's a good question, because for years there has been discussion potentially of Qatar building a pipeline gas pipeline via Syria and heading towards Europe basically right to the middle like from the other. So is this the catalyst for that? It could potentially be a big trigger. However, you know, as you know, it's an unstable region. We need a lot of stars aligning. And also there is increasingly more guys in the Mediterranean that would be competing, which is less important. Guzman And his key question is the United States Navy going to provide export service, escort service through the Gulf? And that's what President Trump's been saying. Yes, I think we're increasingly and not just potentially from the U.S., but I think additional power see it as an opportunity to reopen the sea routes that have been hijacked by either the Houthi in Yemen or our boats be sitting targets, sitting ducks. So it all depends on what's left in terms of weaponry from Iran. And it's hard to go to. But, you know, drones, missiles, we saw potential in mines. But I think the U.S. military plus the Israeli plus, you know, France is sending an aircraft carrier. We heard some Greek also navy go, yeah, did they shut there some some a few boats that are taking on this risk And that coming from Greece, I guess, are saying they're shutting off, however, that people could find out where they are. I guess their radar, they're shutting that off and sort of in essence, going through the strait blind. And this is where, you know, dismantling this kind of rogue state exists because they get intelligence and weapon sharing from China, from Russia. Right. And those are actors that are, you know, malevolent in and now are impacting the global trade. I got one time for one more question. I freshened up my chart of oil in $2,026. We've had other occurrences of 121 $30 per barrel in 20 $26. Can you see a further spike up from 105? So to come back to Alex's question earlier, I think that, you know, the fact that the U.S. now is one of the largest producers, producers, yeah, we have increasingly non-OPEC supply. That's a buffer. And that's that's also why the timing of the strike, you know, maybe few years ago, it would have been impossible. To do that, I think there is a buffer. But again, the duration of the war will be critical.

Leslie Palti-Guzman, Founder at Energy Vista, examines geopolitical risks to oil and gas production as Saudi Arabia announces production cuts. Oil smashed through $100 a barrel as Saudi Arabia joined other major Middle East producers in cutting output, with a standstill of tanker traffic through the vital Strait of Hormuz choking off supplies to the rest of the world.  Brent traded 10% higher around $102 a barrel. Prices eased from almost $120 earlier as the world’s largest economies consider a co-ordinated release of emergency oil stockpiles, with Group of Seven finance ministers set to discuss the move on Monday.  Saudi Arabia is beginning to cut oil production as its storage tanks fill up, according to a person familiar with the situation, following similar moves in neighboring countries. The Kingdom has been diverting supplies via a pipeline to the western Red Sea port of Yanbu, but doesn’t have enough capacity to fully replace export volumes that typically transit through Hormuz.  The war in the Middle East is showing no signs of abating after US and Israeli strikes on Iran more than a week ago, and the fallout is stoking fears of an inflation crisis. The halt to shipping through Hormuz — a narrow waterway that normally handles a fifth of the world’s oil — along with attacks on key energy infrastructure have also driven up prices of natural gas and diesel. -------- Watch Bloomberg Radio LIVE on YouTube Weekdays 7am-6pm ET WATCH HERE: http://bit.ly/3vTiACF Follow us on X: https://twitter.com/BloombergRadio Subscribe to our Podcasts: Bloomberg Daybreak: http://bit.ly/3DWYoAN Bloomberg Surveillance: http://bit.ly/3OPtReI Bloomberg Intelligence: http://bit.ly/3YrBfOi Balance of Power: http://bit.ly/3OO8eLC Bloomberg Businessweek: http://bit.ly/3IPl60i Listen on Apple CarPlay and Android Auto with the Bloomberg Business app: Apple CarPlay: https://apple.co/486mghI Android Auto: https://bit.ly/49benZy Visit our YouTube channels: Bloomberg Podcasts: https://www.youtube.com/bloombergpodcasts Bloomberg Television: https://www.youtube.com/@markets Bloomberg Originals: https://www.youtube.com/bloomberg Quicktake: https://www.youtube.com/@BloombergQuicktake