Israel-Iran ceasefire: Relief as oil prices crash, activities resume in global energy industry

Agency Report

The entire world has expressed relief following Trump’s surprise announcement of a ceasefire between Israel and Iran.

Although there are still fears that hostility could erupt any moment, the global energy industry appears content as Brent fell sharply by 5.06 per cent to $67. 86 per barrel.

At the time, massive Leviathan gas field offshore Israel is resumed production on Wednesday (yesterday), following two weeks in which it was shut down due to the Israel-Iran conflict.

“Brent futures plunged 5.06 per cent to $67.86pb following Trump’s surprise announcement of a ceasefire between Israel and Iran.

“The move eased fears of supply disruption and a potential closure of the Strait of Hormuz. However, the truce remains fragile. as Israel accused Iran of violations and warned of renewed missile attacks”, said Bismarck Rewane, Chief Executive Officer of Financial Derivatives Company (FDC) Limited.

Analysts however pointed out that the fall in crude oil prices is supposed to reflect on petrol price, but doubt if marmeters would be in a hurry to reverse prices as well.

The concern of Rewane is that the uptick, if it lasts, will likely raise logistics costs, exerting upward pressure on inflation in the months ahead.

For the short time the crisis lingered, naira slipped 0.13 per cent to N1, 597/$ at the parallel market and 0.07 per cent at the official market.

Rewane traced the impact to the cost of transaction on food items.

According to him, during the period, the price of gari rose 2.94 per cent to N35, 000 per 50kg bag, rice up by 3.66 per cent to N85.000 per 50kg bag and onion up by 7.69 per cent to N140,000 per bag.

On the fiscal side, analysts said though the crisis may have seen good for the budget implementation, the recent crash in prices may widen the country’s fiscal deficit.
So far, on the global scene, Leviathan, operated by U.S. supermajor Chevron that was shut down on June 13, after the Israeli strike on Iranian nuclear sites that escalated hostilities in the region resumed yesterday.

Following the ceasefire from earlier this week, Chevron’s unit, Chevron Mediterranean Limited, received a notice from the Israeli Ministry of Energy and Infrastructures, whereby the Leviathan platform may be restarted and prepared for production, Israeli firm NewMed, a partner in the Leviathan field, said on Wednesday.

Accordingly, Chevron is now working on restarting the platform and resuming regular production from the reservoir within a few hours, NewMed said.

Leviathan is a major supplier of gas to Egypt and Jordan, which scrambled in the past weeks to replace lost gas supply from Israel’s major gas field.

Another gas field offshore Israel that had stopped production during the conflict has also been cleared by the Israeli authorities to restart output.

UK-based oil and gas producer Energean plc suspended production from its offshore platform in Israel amid the escalation of tensions in the Middle East earlier this month.

After U.S. President Donald Trump announced a ceasefire earlier this week, Energean announced on Wednesday that it is working to safely restart production and resume normal operations at the Energean Power FPSO, after receiving notice from the Ministry of Energy and Infrastructure, instructing the safe restart and resumption of production and operations.

“We look forward to bringing production safely back online, in full coordination with the authorities, to deliver energy security to Israel and the broader region,” Energean’s chief executive officer, Mathios Rigas, said.

Resumption of Israeli gas field operations is set to ease concerns in Egypt and Jordan about gas supply and pressure downwards Europe’s gas prices, which had soared in the past weeks amid fears of gas supply disruptions due to the Middle East conflict.