War puts oil and gas, petrochemical stocks back in play

INTEREST in Bursa Malaysia-listed oil and gas, and petrochemical stocks has returned with the outbreak of conflict in the Middle East.

As energy prices jumped, shares of companies like Velesto Energy Bhd, Hibiscus Petroleum Bhd, Bumi Armada Bhd and PETRONAS Chemicals Group Bhd were heavily traded this week, marking gains despite some profit-taking.

US President Donald Trump anticipates the conflict with Iran could last four to five weeks, but has said he is prepared for a longer period if necessary to achieve his five main objectives.

With military action intensifying on both sides, energy markets have become increasingly nervous as the security situation deteriorates and commercial vessels come under threat.

The Strait of Hormuz is a major artery for global energy trade.

The duration of the conflict could therefore prove critical for global markets and economies.

Insurance rates and freight costs have already risen, which will eventually feed into higher end-user prices.

The expanding theatre of operations has also led to an outage at Qatar’s liquefied natural gas (LNG) facility at Ras Laffan, which accounts for about 20% of global LNG supply capacity.

LNG prices for import-dependent regions such as Europe and Asia have risen sharply as a result. For LNG suppliers like Petroliam Nasional Bhd or PETRONAS, this could be an opportunity for spot trades in the Asian market if spare capacity is available, especially from its LNG Canada joint venture.

Crude oil prices have climbed above US$80 a barrel, with some estimating they could reach US$100 despite the United States offering naval escorts and insurance coverage to vessels plying the war zone.

This war, together with the artificial intelligence revolution, could in some ways push energy security back to the forefront.

It may also reinforce the continued role of coal alongside renewables in a diversified energy mix aimed at achieving a degree of strategic self-sufficiency for nations.

Meanwhile, for the self-proclaimed “peacemaker”, negotiations apply only among equals.

For smaller nations such as the Islamic Republic of Iran, the word “negotiations” may simply mean accepting terms set by the White House. Then the war can end.