Traders fear that they’re going to need to permanently price in instability in the Strait of Hormuz as shortages loom and Asian demand heats up.
Ben Munster
Tuesday’s prices represent a 50 percent increase from the previous month. They also reflect concern that gas supplies will be further squeezed by the combination of depleted European reserves and high summer temperatures in Asia, which analysts expect will drive up demand for air conditioning.
The latest price spikes have fueled concern that unrest in the Middle East is going to be priced in as a permanent feature of energy markets — especially with Washington and Tehran threatening tolls or “service fees” on maritime traffic and the announcement by the Iran-backed Houthi paramilitary group in Yemen that it would embargo the Bab al-Mandab Strait, another vital waterway in the region.
“The seemingly random nature of the continual opening and closing of the Strait of Hormuz means that this is no longer a reliable delivery route for the world’s LNG supplies,” said Tobias Federico, a senior analyst at Montel Energy.
“The recent surge in TTF shows that geopolitical risk is becoming a structural reality for energy markets,” said Alice Acuña, Moeve EVP Trading & Commercial Integration for Madrid-based energy company Moeve.
