Blasé Capital OILY-SLICK words

Although there is extreme madness and mayhem, oil prices, like in the case of other assets, generally gyrate during crises due to macro factors, and sentiments. But as oil zoomed by 40-50 per cent in a matter of days, slumped by a quarter in 24 hours, and jumped back again by 17-18 per cent in another 24 hours, neither of the two factors fully explain the yo-yos. The volatile ups and downs, for no reason whatsoever, without any warnings, and not due to renewed attacks, have amazed experts and analysts. But, as one media report indicates, the movements are not because of economic reasons, or emotions, but due to the war of words. Each syllable, sentence, phrase, or even a hint that may be wrong assumed seems to impact the oil prices violently. “Prices are rising and falling… on words and threats, and their credibility….”

First, the high decibel levels and war cries crazed the oil markets. Then came the calming words from the US President Donald Trump, who said that the war would end soon. It soothed the markets. Later, the Iranian missiles made a lot of noise, and randomly attacked the US and other civilian targets across the Middle East. Oil went mad. This is partly because no one seems to be speaking the truth. The investors know it but hopefully and optimistically take the world leaders at face value, only to be distracted and distraught by another voice. “The result is a volatile market that seems increasingly guided by claims to influence the flow of oil; the more credible a claim appears to be, the more attentive oil prices are to it,” stated the report. Words, and phrases seem to have a way with the fluctuating oil prices.

Of course, the sentences and claims seemed to carry more weight for obvious reasons. For example, when Iran confidently announced that it had effectively closed the Strait of Hormuz, and any oil tanker that passes through it does so dangerously, the world listened. The Strait accounts for a third of the crude oil supplies, especially to large consumers such as India, China, Japan, and South Korea in Asia. The insurers and captains of the tankers backed off, and refused to either provide a safety cover, and undertake the transport perils. Coming after Qatar declared force majeure, and shut down its LNG production, it was imperative for global oil prices to crash through the roof. They did, as they zoomed from $80-plus per

barrel to nearly $120. In the past few days, Iran showed that it had no qualms to attack military, civilian, and part-military targets in the Middle East. Now, it claims that the offices of the tech giants, who help militaries and defence contractors are fair game for its missiles and drone-related attacks. Nothing is safe.

When Trump confidently pronounced that the war was almost over since the US had accomplished its motives, and there was nothing left in Iran to attack, the world listened. “Any time I want it to end, it will end.” Which is true because it started when he wanted it to begin. When the G-7 met, and stated that it would release oil from the emergency and strategic reserves, the traders were up

on their feet. This was despite Trump’s counter that he would not touch the American reserves as there was no need to do so. He maintained that there was enough oil that was sloshing around. By now, the Russian oil came back into the equation, and there were speculations that even Europe may buy from it, after India readily agreed to do so. Indeed, ironically, the Russian oil was priced at $4-5 higher than the global prices.

But Iran did not relent. Its attacks continued. More energy assets in the Middle East and adjoining areas were destroyed, and came under threat. Even as some nations like India contended that a few ships sailed through the Strait of Hormuz, several fuel tankers were struck by boats loaded with explosives in the Iraq waters. Iran, which finessed its smuggling routes during years of western sanctions to earn illegal revenues, knew the routes better than the others. It knew where to attack, and when, and when this became apparent, the oil traders lost their nerves, yet again. So, when Iran claimed that the US and the world need to be ready for an oil price of $200 a barrel, the "words carried weight because they were accompanied by action. Tankers, oil wells, and storages and ports were attacked… and shipping slowed through the Hormuz. Suddenly, the earlier narrative of a nearly-finished war looked less convincing.” Oil was back at $100.

According to media commentaries, despite its initial spike in the first few days, which were due to logical reasons, oil began to listen to Trump, G-7, and the powerful International Energy Agency. They promised assistance in the form of extra insurance, extra oil, and extra assurances of a short war. But as the day went on, oil began to listen to the adversaries, whose counters were louder, as loud as their missiles.