The oil market navigates a shaky ceasefire

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0:17Good morning from the Financial Times. Today is Thursday, April 9th, and this is your FT News Briefing. The ceasefire in the Middle East is on shaky ground, and the oil markets are watching all this uncertainty very closely. Plus, Pakistan sees an opportunity to bring two adversaries together. I think Pakistan sees this as an opportunity to show the world that it's a useful country that can play a responsible role in the region, that it can impress the United States. I'm Mark Filippino, and here's the news you need to start your day.

0:58Iran has threatened to withdraw from a ceasefire with the U.S. Tehran says that's because of a wave of Israeli attacks in Lebanon that killed hundreds of people. In response, Iran has halted tanker traffic through the Strait of Hormuz. The U.S. and Israel said they did not consider the ceasefire to include Lebanon. Gulf states also continued to face missile and drone attacks yesterday. Those included a hit on Saudi Arabia's east-west pipeline that carries oil to the Red Sea. Despite all this, the price of oil fell. Brent crude stayed below$100 a barrel. But there is still a lot of uncertainty in oil markets.

1:33Here to talk about it is the FT's U.S. Energy Editor, Jamie Smith. Hi, Jamie.

1:37Jamie Smyth: Hello, Mark. So, yeah, Jamie, how are oil markets reacting to all this? Well, certainly, whenever we got the announcement late on Tuesday that there was going to be this two-week ceasefire, oil plunged in value. It was down 17%, 18%, below$100. It seemed like it was all good news because traders were thinking this is de-escalation. But there's a lot of uncertainty. We've seen missiles shot from Iran into their neighbours. And we're not quite sure about what the status of the Strait of Hormuz is going to be. And a key thing was to keep it open for traffic for all the Gulf states so that they can supply Asia and other parts of the world.

2:22Jamie Smyth: But at the moment, we're not sure if there's going to be a tolling arrangement, which would mean that every ship passing through that waterway would have to pay potentially up to$2 million. And we're not sure if the U.S. is going to join that arrangement. I think oil traders are going to wait to see what happens. I don't see that we're going to see oil prices drop a lot more until we get some clarity during this two-week period. Jamie, countries in Asia have especially felt the pinch of this disruption to global energy supplies. You have a scoop that they are actually looking to the US now and that could set a record for American oil exports.

3:04Is that right?

3:05Jamie Smyth: That's right. So Asia is definitely one of the most vulnerable parts of the world to oil and fuel shortages because 80 % of oil and oil products were actually passing through the strait to get to Asia. So they are scrambling to try and find alternative sources. And of course, the United States is the biggest oil and gas producer in the world. And what we're seeing is a huge armada of empty tankers making their way to the US to collect crude and potentially deliver this into Asia. So we've got 68 ships on their way, according to research by Kepler, a research group. That's more than double the typical amount that we'd be traveling.

3:48Jamie Smyth: The United States has some spare oil to export. And where's it getting its oil for these extra exports? It's getting it from the Strategic Petroleum Reserve, which the United States has just released over 40 million barrels of oil from that. And also, you've seen a lot of Venezuelan crude being imported into the United States. And that crude can either be exported, or it will displace some of the US crude in this country and can be exported to Asia. So Kepler predicting that exports could rise by 30 % in a single month, up to 5 million barrels a day, which would be really quite incredible. I guess I wonder if this is just a temporary fix for those buyers, or is this going to be a long-lasting change in the global oil market?

4:38Jamie Smyth: I think for it to be a long-lasting change, should have to see an increase in production in the United States. And we aren't really going to see a lot of that over the next 12 months. There isn't really the capacity to ramp up production here as there would have been in past crises because the shale sector, you know, they will want to see a sustained period of high prices before they risk investment. And also there's just less good prospects to drill in the shale patch in the United States. So I think it's probably a temporary phenomenon, which we're going to see while this crisis proceeds. Once you drain the SPR, I think there'll be a little bit less oil around.

5:23Jamie Smyth: And then Venezuelan exports could maybe increase slightly, but that is also a bit of a variable. So I would think in the short to medium term, this is probably just a temporary fix. Jamie Smith is the FT's U.S. Energy Editor. Thanks, Jamie. Thank you very much.

5:46U.S. central bankers are worried that if the conflict in the Middle East drags out, it could hit American jobs. We got the minutes from the Federal Reserve's March meeting yesterday. They showed that policymakers sparred over whether to raise rates or cut them. Quote, most Fed policymakers think a drawn-out war will require a rate cut to support the jobs market. but quote, many think a rate rise will be necessary to combat rising prices. The debate highlights the widespread economic fallout that could happen if the war continues.

6:23One country is trying very hard to broker peace between Iran and the U.S. That's Pakistan. It helped with the ceasefire agreement on Tuesday, and now it's urging both nations to come to its capital, Islamabad, for further negotiations. But how did Pakistan put itself in the middle of all this? Here to discuss is the FT's Hamza Jelani in Islamabad. Hi, Hamza. Hi, thanks for having me. So yeah, what has Pakistan been doing? Pakistan for the last few weeks has been serving as a mediator or a message carrier between the US and Iran, which haven't been speaking directly to each other since talks broke down right before the beginning of this war in late February.

7:02Pakistan is a rare country in that it borders Iran, has a kind of complicated political relationship, but largely warm ties with Tehran. And increasingly, Field Marshal Asim Muneer, the military strongman of Pakistan and its de facto leader, has become a very close ally of U.S. President Donald Trump. Trump calls him his favorite field marshal. And so as a result, Pakistan was uniquely situated to play a role as facilitator, passing messages from the U.S. and Iran to bring us close to a kind of mutually agreeable ceasefire. Hamza, aside from trying to help out two allies here, what's in it for Pakistan?

7:42What's their motivation? I think the main motivation Pakistan faces is trying to just see the war end. I mean, Pakistan is, in a lot of ways, in the middle of the storm that's being caused by disruptions to the Strait of Hormuz and attacks on Iran. Pakistan is an import dependent country. It imports most of its oil and a large portion of its gas. It's a fragile economy. It can face a balance of payment crisis if fuel prices increase considerably. And we're already seeing that tick up. And they face a clear security problem. Iran is on their border. And they're worried that if Iran collapses or if this war goes on, it's going to have a big spillover in their own country.

8:23So more than anything else, Pakistan has an interest in seeing the war end. But in addition to that, I think Pakistan sees this as an opportunity to show the world that it's a useful country that can play a responsible role in the region, that it can impress the United States, that has had a somewhat frosty relationship with Pakistan since Osama bin Laden was discovered there in 2011, that they can show themselves to be a kind of agent of peace. Sure. I mean, and that makes a lot of sense. But what problems might Pakistan face if this conflict worsens or if attempts at peace talks fail? The peace talks go south.

8:58I think there's quite a few dangers for Pakistan in that. I think the first danger is that we return to the world where the energy supplies are in doubt and the price for the shipments that they can get goes through the roof. So that's one area where they're quite concerned that they could see themselves going back to, say, the time of 2023 after the Russian invasion of Ukraine where they almost defaulted. In addition to that, one of the more important issues is that Pakistan last year signed a mutual defense pact with Saudi Arabia. And insofar as Iran has launched missile and drone attacks at Saudi oil facilities, there's a real risk that Pakistan will get dragged into a war that would effectively pit it on the same side as the US and Israel, which are deeply unpopular, and against Iran, which is wildly popular throughout Pakistan.

9:44it's going to be a very difficult negotiation. And Pakistan potentially could be seen as having bitten off more than it can chew. But for now, it feels like it's better that it's in the race to try and bring peace than sitting on the sidelines. That's the FT's Hamza Jelani in Islamabad. Thanks, Hamza. Thank you.

10:07NHS England's data chief, Ming Tong, is ignoring internal controversy about Palantir. The government health system is using the company's technology to collate patient data all in one place. The controversy comes from Palantir's role in U.S. defense and immigration enforcement. And some NHS staff are refusing to work on the platform. Government ministers may want to use a break clause in the company's contract that would eject Palantir from NHS systems. Even still, Tong wants to do the opposite. She wants to embed the U.S. company's technology deeper into hospitals over the next year. Tong told colleagues that Palantir's software is delivering, quote, outstanding results like speeding up surgery and getting patients home quicker.

10:49Palantir and NHS England both declined to comment. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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