Oil Slides as Global Leaders Seen Acting to Blunt Supply Shock

• Oil tumbled amid mounting assurances from global leaders that policy interventions will blunt the impact of the Iran war on energy prices, while the conflict continues to disrupt crude production and refining in the Middle East. West Texas Intermediate fell as much as 12%, following a dramatic session on Monday, highlighting heightened volatility in global oil markets.
• International Energy Agency Executive Director, Fatih Birol, said he has convened an “extraordinary meeting” of the intergovernmental group to assess market conditions on Tuesday, while Group of Seven nations asked the agency to prepare scenarios for the release of emergency oil stockpiles as the Middle East crisis roils markets. These measures reflect growing efforts by policymakers to stabilise energy markets.
• In addition, US President Donald Trump said he would waive oil-related sanctions and get the country’s navy to escort tankers through the vital Strait of Hormuz, while also saying he was open to speaking with Iran. The developments collectively fuelled expectations that world leaders would intervene before the worst of any supply shock emerges.
• Prices remain up by more than 50% this year as fears that a conflict would hinder supplies from the Middle East increasingly materialise. Saudi Arabia, Iraq, the United Arab Emirates and Kuwait have lowered their collective output by as much as 6.7 million barrels a day, while the war has effectively closed the region’s main export route and shipping through the Strait of Hormuz has slowed significantly.
• The oil market is experiencing one of its most volatile periods on record, with Brent fluctuating around $87 a barrel on Tuesday after trading as high as $119.50 and as low as $83.66 the previous day. Financial flows and options markets have exacerbated price swings as investors assess how the conflict and disruptions to shipping through the Strait of Hormuz will affect global energy supply.

(Source: Bloomberg News)