Energy Aspects founder Amrita Sen says oil futures are mispricing the Middle East crisis, arguing physical crude should trade near $150 a barrel. The disruption has also triggered a shipping crunch around the Strait of Hormuz, even as Brent crude holds above $100 and heads for a weekly gain.
Oil futures prices are disconnected from events on the ground in the Middle East, and some physical crude oil should be trading closer to $150 a barrel, Amrita Sen, founder and director of market intelligence at Energy Aspects, told CNBC. Sen said the market is surprisingly complacent given the intensity of hostilities as Iran-aligned Houthis target Saudi energy and other infrastructure.
She argued futures traders are focused on the wrong signal. Sen told CNBC: "Whatever is happening on the ground, the market seems to just ignore that." She added that the crisis has extended into an unprecedented shipping crunch, with the market ignoring actual infrastructure damage and disruptions to shipping.
Shipping crunch ties up tanker fleet
The disruption has pushed a large tanker fleet into ship-to-ship transfers outside the Strait of Hormuz, driving global freight rates to record highs and cutting vessel availability on other routes. Russell Hardy, chief executive officer of Vitol, the world's biggest independent oil trader, described the shuttle-shipping through the strait as very inefficient.
Hardy, speaking at the Energy Intelligence Forum in London, said more crude is now coming out of the Middle East, but the bottleneck has shifted into a shipping crisis because there is not enough shipping capacity to go around.
Brent holds above $100 a barrel
Crude oil futures fell early Friday in Asian trade, but Brent crude held above $100 a barrel and was on track for a weekly gain. The number of attacks on tankers in the Strait of Hormuz surged over the past week, threatening to halt the rebound in Middle East oil supply.
Source: Commodities Analysis & Opinion
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