CERAWeek, the energy conference in Houston, returns as Iran's conflict shakes global energy markets
Next week, the world's top energy executives? will return to Houston as the escalating U.S. - Israeli war on Iran has turned into a nightmare for global energy markets. Unprecedented attacks?on infrastructure? and shipping disruptions have sent oil prices soaring as governments struggle to combat inflation and avoid recessions.
The global oil price has risen this week to almost $120, a level not seen since 2022, when Russia's war in Ukraine caused a market disruption.
Analysts and industry experts 'expect that prices will remain high long after combat operations have ended. The region will not recover for years from the air strikes and Iran's virtual closing of the Strait of Hormuz - the conduit of 20% of world oil and LNG.
Qatar, for example, said that repairing a damaged facility to store liquefied gas would take many years. Over 10,000 participants from over 80 countries will focus on Venezuela at this year's CERAWeek Conference. The U.S. captured Venezuelan President Nicolas Maduro and eased sanctions against the South American OPEC nation to try and kickstart the oil industry and increase investment. The geopolitics surrounding energy have never been so thick and fast. "The Gulf situation plus Venezuela plus all the knock-ons issues around Russia is really an extraordinary moment," Geoffrey Pyatt said. He was Assistant Secretary of State for Energy Resources under former President Joe Biden, and is now Senior Managing Director at U.S. consulting firm McLarty Associates.
Middle East Chaos The five-day festival, which begins on Monday, is a result of Iran's closure of the Strait of Hormuz, forcing Middle Eastern producers shut down a large portion of their production. Tehran has also hit oil and gas targets along the Gulf after Israel attacked one of Israel's large gas fields last week.
Most consumers have given up on the idea that disruptions will be "short-lived". As the Middle East conflict has disrupted crude and feedstocks exports, many refineries and petrochemical firms, mostly in Asia have reduced runs, closed units, or declared force majeure. Diesel prices in the U.S. have reached $5 per gallon for first time since 2012, while gasoline prices are now at $4 per gallon. The political stakes have risen for Donald Trump and the Republican Party in advance of November's midterm elections.
CERAWeek speakers and participants include U.S. Energy Sec. Chris Wright, Interior Sec. Doug Burgum, Ministers from OPEC+ member countries Nigeria?and United Arab Emirates as well as CEOs and directors of Aramco and Chevron.
The Gulf War has been simmering for nearly half a hundred years, and concerns have been raised about it for that time. In an interview, Dan Yergin said that it is now happening. He was a Pulitzer Prize winning author and vice chair of the CERAWeek conference organization S&P Global.
Yergin stated that security and affordability would be the defining words of CERAWeek. This is a rapid pivot from the weeks prior, when Big Tech, and its relationship with the energy industry, was slated to dominate the theme.
"All of those producers will view the world differently and each country will assess its degree of dependency differently. "I think that there will be a push to diversify supplies," Yergin stated. Globally, policymakers are now also considering proposals to increase nuclear energy and renewables. They may also want to grow strategic stockpiles or increase domestic production to reduce their long-term dependency on oil and natural gas imports.
VENEZUELA’S POTENTIAL Maria Corina Machado is a Venezuelan Nobel Peace Prize-winning opposition leader who was added to the CERAWeek official agenda at the last minute. She is expected to speak to attendees on Tuesday afternoon. Last year, her team presented a detailed energy program at the conference. Investors will be watching for any signals that she may send this year about interim president Delcy Rodriguez's efforts to boost production quickly with Washington's assistance as she pushes to restore democracy.
Pyatt said that the fact that Maria Machado will be speaking at CERAWeek reflects the unresolved story of politics. Dozens have been searching for investment opportunities in Venezuela's vast crude oil reserves. Legal risks, regulatory uncertainty, and outdated infrastructure that cannot be used without major investment are all obstacles they must overcome. U.S. Energy Secretary Chris Wright stated last month that he expected a "dramatic" increase in Venezuela's production over the next few months. However, industry experts expect an early expansion to boost output from 1 million barrels per day by up to 500,000 in just six months. This increase is not enough to compensate for the disruption in supply caused by the Iran crisis.
AI AND TEXAS SHALE This conference will also focus on the role of artificial intelligent in the energy sector and include an exhibition area for both start-ups as well as established companies to showcase their new technologies. The efficiency gains and new technology that helped boost U.S. crude production to record levels last year, pushed the country's crude oil output up to 13.6 million barrels per day. Analysts and industry executives said that the recent rise in oil prices will not lead to a huge increase in production unless they remain high for several months.
According to the U.S. Energy Information Administration, the Permian Basin, which spans West Texas and southeastern New Mexico is expected to increase production by 10,000 bpd to a new record of 6.6 million bpd.
Dan Pickering is chief investment officer at Pickering Energy Partners. He said that the outlook for U.S. oil production remains unchanged until it becomes clear whether this war will end or not.
Pickering continued, "It won't be a tsunami." (Reporting and editing by Nathan Crooks, David Gregorio, and Arathy S. Somasekhar from Houston)
(source: Reuters)
