Saudi Arabia Reallocating Supply Not Cutting Output, Kpler Says

1144 GMT – Saudi Arabia’s output reduction is occurring in fields that don’t produce Arab Light crude, the main grade that can be exported via the Yanbu terminal on the Red Sea, Amena Bakr, head of Middle East energy and OPEC+ insights at Kpler, says. Bloomberg on Monday reported that Saudi Arabia is starting oil-output cuts as storage fills up due to Hormuz disruptions. “This is not accurate, according to our understanding,” Bakr says in a post on X. “There is a reallocation of supply that’s happening, not a cut.” Saudi Aramco has been diverting more of its crude via the East-West pipeline, which bypasses the Strait of Hormuz, Kpler says. (giulia.petroni@wsj.com)

Middle East Oil Shut-Ins Raise Risk of Lasting Supply Losses

1047 GMT – Prolonged oil production shut‑ins in the Middle East raise the risk of partial or permanent production losses due to reservoir, well, facility, and logistical constraints, according to Societe Generale. “Time is critical: the longer disruptions persist, the greater the likelihood that what initially appear to be temporary outages evolve into more durable supply losses,” Michael Haigh and Ben Hoff say. Risks start increasing after about two weeks offline and intensify beyond a month, with capacity typically returning to only 80%-95% after outages of several months, according to the bank. If more producers beyond Iraq and Kuwait curtail output, quickly restoring pre‑crisis supply would become increasingly difficult.(giulia.petroni@wsj.com)

Surge in Oil Prices May Still Be Short-Lived

0923 GMT – The surge in oil prices may still be short-lived, according to Julius Baer’s Norbert Rücker in a research note. “Oil markets have entered panic mode,” says the head economics and next generation research. While prices have surged to over $100/bbl, most of this move seems to “come from nervousness and sentiment, since tangible and significant fundamental shifts in the conflict are not visible over the weekend,” he says. Rücker still believes the energy price spike will be intense but short-lived. “Meaningful infrastructure damage remains absent, and Iran’s military threat seems to be softening,” he says. Front-month WTI crude oil futures are 15% higher at $104.15/bbl; front-month Brent crude futures are 15% higher at $106.80/bbl. (tracy.qu@wsj.com)

Oil, Gas Expected to Trade Around Current Price Levels Through March

1016 GMT – Oil and gas prices are likely to trade around current levels through March as supply disruptions evolve and some producers begin shutting in output, Julius Baer analyst Norbert Ruecker says in a note. He projects that up to 75% of Middle Eastern oil flows relying on shipping through the Strait of Hormuz could face temporary shut-ins next week, though Saudi Arabia, the United Arab Emirates and Iraq have pipelines that bypass the Strait. Temporary shut-ins may reduce, but not eliminate, the oil market’s surplus this year. Stagnating demand and rising production, particularly in South America, should keep supplies up, he adds. However, rising road fuel prices, particularly in the U.S., are worth watching. If the Trump administration were to impose restrictions on petroleum exports, this would trigger a sharper and longer oil price spike. (jason.chau@wsj.com)