NTDNews: David Blackmon Talks Oil Prices as Israel and Iran Reach a Ceasefire

I appeared on NTD News Tuesday afternoon with host Don Ma to discuss oil prices and where they go now following the ceasefire between Israel and Iran brokered by U.S. President Donald Trump.

Here is a clip of the 8-minute segment - a transcript follows:

Transcript:

Don Ma: Oil prices have hit their lowest level in two weeks after the Israel and Iran ceasefire announcement. This comes as worries of supply disruptions in the Middle East have eased. Brent crude futures were down almost $4, or about 5%, to under $68 a barrel. West Texas intermediate crude also fell over 5% a barrel to under 65 dollars. Brent was on track to its lowest settlement since June 10th. Meanwhile, West Texas Intermediate was on its way to its lowest since June 6th. A Monday both dipped more than 7% after rallying to five-month highs following U.S. Strikes on Iran's nuclear facilities. And joining us now to discuss about this is David Blackmon, energy policy analyst and consultant. He's a 40-year veteran of the oil and gas industry. David, thank you so much for joining us today. What is the trajectory of oil prices right now in light of the Israel-Iran conflict? How does the situation look to you?

David Blackmon: Well, we're back even below where prices sat prior to the conflict beginning on June 12th. So, I have, I think we're 6% below that level, right? About $64.50 right now, as we're talking. I expect them to go still lower here in the coming few days. I think they'll settle around 62, $63 and, and probably remain pretty steady there. I'm, the outcome of the conflict between Israel and Iran has significantly reduced tensions, not just in the middle East, but globally. And when you take tension out of the global trading system for crude oil prices, they tend to settle lower given that. And the fact that the market's significantly oversupplied right now, there's nowhere for prices to go at this point, but down.

Don Ma: Okay, David, I'm sure you agree with me when I say there's probably a lot of uncertainty up ahead. So, I mean, what is the best and worst case scenario in your mind? And in the worst case scenario, how much would prices be?

David Blackmon: So yes, I agree with you: There are a lot of uncertainties ahead. But when you're talking about crude oil prices, there's only two big factors that could really spike the prices related to the middle East.

One would be for the Strait of Hormuz to be shut down. That's the major choke point for 20% of all crude oil exports flow through that region every day. And then the other would be, should the conflict restart with Israel targeting Iran's refining or export facilities, which would take most or all of Iran's crude oil off the market, which is almost 2 million barrels a day.

As long as neither of those events happen - and that's what traders have been looking at over the last two weeks, the potential for one of those two events to happen - as long as neither one of those happens, there's really, the Middle East is not going to really put any kind of upwards pressure on prices.

Now there are other events globally that could happen that could do that. But the Middle East right now is again, as long as those two, or either of them, don't happen, it's really stable and kind of a non-factor.

Don Ma: Okay, so those two scenarios that you just described, in your view, what are the chances of them actually happening?

David Blackmon: I would say they're pretty non-existent at the moment. Now that depends, of course, on Israel and Iran maintaining the ceasefire. And I think it's fairly evident looking at what President Trump had to say today and indications coming from Israel, that really Benjamin Netanyahu, the prime minister of Israel and the IDF, had additional targets. They wanted to hit military targets in Iran to take them offline.

And so there is question about whether or not that ceasefire is going to hold, but, um, you know, as long as this current status quo remains, I'd say the chances are pretty, pretty much nonexistent.

Don Ma: Okay, so oil soared as high as $81 a barrel. I just want to know, David, what would a sustained return to that level mean for consumers and businesses?

David Blackmon: Well, of course it would spike gasoline prices. We're fortunate that oil prices only got up to $81 very temporarily. And so that those costs that higher price didn't flow through to gas prices at the pump.

But if you, if prices were to move that much higher, that would be almost a 30% increase. You'd probably be looking at somewhere in the vicinity of $3.80 to $4 a gallon for regular, which right now is right around $3, so almost a dollar a gallon additional cost for gas consumers.

And the thing is about higher gasoline and diesel prices, all of our consumer goods in the United States, and really most countries, are transported by trains, big trucks or ships that run on diesel fuel. So. Higher fuel prices, you know, end up becoming higher food prices at the supermarket, our clothing prices, and all other consumer goods.

Don Ma: So in terms of oil prices either stabilizing or continue to fluctuate, which way are you leaning towards more?

David Blackmon: My outlook right now, currently, is they're going to remain pretty stable and they're going to be remain pretty low. That's going to mean less drilling here in the United States, less domestic oil production and probably we'll have an increase in our own oil imports in the months to come.

But overall, that's also a very positive sign for the health of the economy. It will keep inflation low and prices low and people will have more money in their pockets for other things.

Don Ma: How sensitive do you say the oil market is, the global oil market right now?

David Blackmon: Right now, well, at this moment, assuming no further war breaks out anywhere in the Middle East, tensions are very low. It's very stable. Traders right now are looking at one of the most stable situations they've had in a long time in the middle east.

Of course, we have the Ukraine conflict ongoing involving Russia, which is the third largest oil producer on earth. You have the Chinese economy in... kind of in flux. No one knows really how strong it is performing currently or how strong it’s going to perform the rest of the year, and that has a big impact on global oil demand. And so there is, as you said earlier, a lot of uncertainty globally, but just in terms of the oil markets, it's a pretty stable situation at the moment.

Don Ma: Okay, I'll just give you one more question here. What are your thoughts? Can you describe the situation in terms of the supply and demand when it comes to oil right now? Trump mentioned that China is now free to buy oil from Iran.

David Blackmon: Yes. In fact, China gets a majority of its daily oil imports from Iran. Right now, globally, the market as a whole is oversupplied right now. The demand has not increased as rapidly as it needed to keep up with supply here for a year and a half.

So, we probably have a glut on the market of one to two million barrels of oil per day. Uh, that's not all a negative thing for, for crude markets or for countries like the United States, where we have a real need to refill our strategic petroleum reserve here in the U S right now. So, a glut on the market means the department of energy is able to start refilling the strategic petroleum reserve at lower prices, much more affordably, and, and so that's a positive thing.

But overall, it's an oversupplied market. And, there are some projections thinking that it may balance itself out towards the end of the year, but right now there's a lot of pressure for prices to go lower.

Don Ma: Well, all right, David, again, thank you very much for coming on. It's always great to talk to you.

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