Fresh fears over Middle East tensions cast cloud as energy leaders meet in Calgary
CBC
Worries over escalating tensions in the Middle East and their potential to cause oil price disruptions hung over Day 1 of a major energy sector conference in Calgary.
On Tuesday, Israel's military said Iran had fired missiles into the country. Earlier in the day, a senior U.S. administration official warned of "severe consequences" should a ballistic missile attack take place.
Global oil prices jumped on the news — the price of U.S. benchmark West Texas Intermediate was up nearly five per cent, topping $71 US per barrel midday on Tuesday. It ultimately closed up $1.66 US, or 2.44 per cent, to $69.83 US per barrel.
At the Energy Disruptors: Unite conference, which kicked off Tuesday and is one of the largest annual energy sector conferences in Calgary, the day's geopolitical developments were not far from delegates' minds.
Calgary is home to the corporate head offices of Canada's oil and gas sector, where fortunes rise and fall with commodity prices. Big companies make budgets and production plans based on short- and long-term assumptions about where the price of oil is heading.
"The escalation is obviously unsettling," said Peter Tertzakian, a Calgary-based energy economist and founder of the ARC Energy Research Institute, in an interview on the sidelines of the conference.
"Nobody wants to see highly volatile prices, and certainly no one wants to see conflict."
Oil prices have been weighed down this fall by lower-than-expected Chinese demand and uncertainty around the plans of OPEC (Organization of the Petroleum Exporting Countries).
But Tuesday's events in the Middle East had markets rattled with fresh fears of potential supply outages if the conflict between Iran and Israel escalates or expands into the broader region.
Tertzakian pointed out one-quarter of the world's oil supply travels through the Strait of Hormuz, which lies between Iran and Oman. The possibility that Iran could cut off oil shipments through the strait is something that could significantly shake up the global economy, he said.
"We don't know if that's going to happen, but it's certainly something the oil markets are very concerned about," Tertzakian said.
Al Salazar, director of intelligence for energy data and analytics provider Enverus, said Tuesday's surge in oil prices is thus far nothing more than a knee-jerk reaction and could settle out within a day or two if there is no physical disruption to global supplies.
"It's basically trading on fear right now. You know, nothing has actually changed in terms of supply-demand balances yet," Salazar said in a phone interview.
But he added that oil prices have been excessively bearish in recent months, so an event like Tuesday's missile attacks could be enough to cause traders to rethink their longer-term stances.
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