Houthi attacks may change energy markets situation: S&P Global Ratings

The latest attacks by Yemen’s Houthi rebels may change the situation of energy markets, which were in a ‘refined product scarcity’ environment prior to the attacks because of very low global inventory, rather than a ‘crude oil scarcity’ state, according to S&P Global Ratings, which noted ‘a disconnect’ between oil prices and refined product prices.However, it is unclear how quickly oil shipping logistics can adapt, it noted in a release, saying there is a risk that the Houthis could attack oil refineries along Saudi Arabia’s west coast. As there is approximately 2 million barrels per day (bbl/d) of refining capacity there, a vital diesel supplier to Europe, sky high diesel prices could further escalate, it remarked.

The latest Houthi attacks may change the situation of energy markets, which were in a ‘refined product scarcity’ environment prior to the attacks because of very low global inventory, rather than a ‘crude oil scarcity’ state, S&P Global Ratings said.
It noted ‘a disconnect’ between oil prices and refined product prices.
However, it is unclear how quickly oil shipping logistics can adapt, it said.

S&P Global Ratings recently reviewed its oil price deck, leaving its oil and natural gas price decks unchanged.

Another key risk is whether China will continue to draw down its massive oil stocks or return to pre-war open market oil purchase levels. Oil prices have been surprisingly lower than what S&P Global Ratings and market pundits would have expected, and crude availability has been surprisingly resilient.

A primary reason is that China has reduced its open market purchases by 5-6 million bbl per day and has been drawing from its massive oil reserve stockpiles. China doesn’t divulge its oil reserves, which have been estimated to be 1.3-1.6 billion barrels.

To put this in perspective, the U.S. has the next highest reserves, approximately 410 million barrels of commercial inventories (not including 337 million barrels in its Strategic Petroleum Reserve). If China decides to increase open market oil purchases, it could lead to another rapid increase in oil prices.

Fibre2Fashion News Desk (DS)