GE16 : CRUDE OIL AT USD120–150?

Unfortunately, it looks increasingly possible that from around mid-October, crude oil prices will begin moving upwards - slowly at first, but potentially towards USD120–150 in the months that follow.

One important reason is that the buffers which have helped contain prices are being depleted. The United States, Japan, European countries, South Korea and others have drawn substantially on emergency oil stocks. At some point, they will need to replenish them—and return to the market as buyers at precisely the wrong time.

America has made strategic mistake after strategic mistake, one after another. It began with the decision to attack Iran in February under the influence of Israel. Today,  instead of finding a way to accept defeat, cut its losses and end the confrontation, America continues with a tit-for-tat war with Iran - prolonging the uncertainty around Hormuz and the global energy market.

Saudi Arabia has now made its own strategic mistake by triggering a war with the Houthis at precisely the wrong time. The danger is that the Houthis respond by seriously disrupting the Red Sea or even closing Bab el-Mandeb. If both Hormuz and Bab el-Mandeb are severely disrupted, the consequences for the world economy could be terrible.

For Malaysia, this creates a serious political calculation. PMX and his economic team, will have access to far more information and sophisticated projections than most of us. They would already be studying these possibilities.

If their numbers point in the same direction, PMX must decide whether to call GE16 before mid-October  or before the year’s end. Or will they ride through the storm, wait until next year, and hope that the Middle East settles down?

What do you think?

Peace,

Anas Zubedy