Oil prices hit $110 a barrel after US President Donald Trump’s decision to postpone strikes on Iran’s energy plants failed to alleviate fears of a protracted conflict. US Secretary of State Marco Rubio will discuss conflict de-escalation at a G7 meeting in France today. At the same time, The Wall Street Journal reports that the Pentagon is weighing sending up to 10,000 troops to the region.
The Macquarie Group warned that oil may hit a record $200 barrel if the war drags on until June — a scenario that officials in Saudi Arabia and the White House are reportedly looking into. Meanwhile, a JPMorgan analysis found the world is now moving from a problem centered on a shock to energy flows to one of stock depletion, which is likely to turn into supply scarcity for much of the world. March saw one of the largest drawdowns on global oil inventories on record.
The last cargo ships that left the Gulf before the war started have nearly all reached their destination in Asia, which is likely to face the first visible demand losses in April, according to JPMorgan. Africa will be next, and then Europe. The US, with longer voyage times and substantial domestic production, will initially experience a price shock, but in California, the most exposed region, this could evolve into a supply challenge by late April and May.