Oil prices can’t catch a break for more than a day - not even with a high-profile assassination or attacks on Saudi Aramco. The only thing that will override the fundamentals for oil would be a longer-term sustainable hit to supply, and nothing on the geopolitical scene is pointing to that.
The US-Iran De-Escalation Trick
The markets have decided that de-escalation is now the name of the game for the US-Iran conflict. While oil prices initially responded with a nice boost and equities took a dive, the sentiment was short-lived, particularly because Iran’s reprisal attack on Iraqi military bases housing US forces was far less spectacular than the assassination of Soleimani.
Earlier this week, Oilprice.com predicted that the U.S. would further retaliate with airstrikes on Hezbollah-linked targets in Iraq and Syria. On Friday morning, an airstrike was launched in eastern Syria against the Iraqi Popular Mobilization Force, an Iran-backed militia. Reports indicate that there were around eight casualties, with accusations that the strike was actually led by the Israelis, and no confirmation from Washington.
At this point, however, it would be dangerous to assume this is the end, even if WWIII - or anything resembling conventional warfare - is not imminent.
What Hezbollah wants is to get the U.S. out of the region, which includes south Lebanon, Syria, Iraq and Yemen. Of those, Iraq is the key, and the war over influence…
Oil prices can’t catch a break for more than a day - not even with a high-profile assassination or attacks on Saudi Aramco. The only thing that will override the fundamentals for oil would be a longer-term sustainable hit to supply, and nothing on the geopolitical scene is pointing to that.
The US-Iran De-Escalation Trick
The markets have decided that de-escalation is now the name of the game for the US-Iran conflict. While oil prices initially responded with a nice boost and equities took a dive, the sentiment was short-lived, particularly because Iran’s reprisal attack on Iraqi military bases housing US forces was far less spectacular than the assassination of Soleimani.
Earlier this week, Oilprice.com predicted that the U.S. would further retaliate with airstrikes on Hezbollah-linked targets in Iraq and Syria. On Friday morning, an airstrike was launched in eastern Syria against the Iraqi Popular Mobilization Force, an Iran-backed militia. Reports indicate that there were around eight casualties, with accusations that the strike was actually led by the Israelis, and no confirmation from Washington.
At this point, however, it would be dangerous to assume this is the end, even if WWIII - or anything resembling conventional warfare - is not imminent.
What Hezbollah wants is to get the U.S. out of the region, which includes south Lebanon, Syria, Iraq and Yemen. Of those, Iraq is the key, and the war over influence in Iraq is far from over. Iran is highly strategic and extremely pragmatic. This is not North Korea, and not simply a loose cannon that will pursue irrational attacks. Every move is calculated, which is exactly how it differs from the Trump administration. The zero-casualty attack on Iraqi military bases was hinted at in advance. It’s either a purposeful de-escalation, or a dangerous distraction.
What Iran knows is this: Trump wants to get out of the Middle East. Iran is happy to oblige, but US troops aren’t likely to be pulling up stakes for some time, making this still the biggest proxy war venue for 2020.
In this atmosphere, we do not see what Iran would gain by blocking the Strait of Hormuz.
Another Saudi Solar Push
Saudi Arabia is making strides toward solar power, now seeking bids to build four solar power plants that will supply 1,200 megawatts of solar power for domestic consumption in the third round of the Kingdom’s National Renewable Energy Program.
This would ostensibly free up more oil barrels to export for the Kingdom, which consumes a quarter of what it produces. The Saudis plan to install a total of 60,000 megawatts of renewable energy over the next decade, and will issue tenders for private companies to build about a third of that. The rest will come from SWF partners.
For the current bids, bidders will need to include a minimum of 17% local content in their facilities. The second round attracted 250 bidders, but the successful bidders of that round have not yet been announced.
Saudi Arabia’s energy needs could as much as triple by 2030, so the addition of renewable energy is urgent for the country.
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