Energy markets lift on US assassination of Iranian general

By Meagan Evans. Published at Jan 6, 2020, in Features

Financial market news was fairly light on last week as many people remained on holiday and headlines were dominated by harrowing tales out of Australia’s bushfire ravaged regions along with escalating US-Iran tensions.

While trading volumes were low, the first two trading days of 2020 saw the ASX get off to a good start as China announced a new round of economic stimulus. This helped ease the pain after sharp falls on New Year’s Eve that led to the local market ending the week down 1.3%.

Much of the ASX selloff on the 31st was due to the building tensions between the US and Iran, which escalated to a US drone strike near Baghdad’s airport that targeted and killed top Iranian military commander, Qassem Soleimani.

The strike was approved by US president Donald Trump, say the US Department of Defence, in response to previous attacks orchestrated by Soleimani on American citizens across the Middle East.

But, as described by Democrat Joe Biden, Trump in effect has “tossed a stick of dynamite into a tinderbox,” in a move that could leave the US “on the brink of a major conflict across the Middle East.”

The response out of Iran suggests that the words of the democratic presidential candidate may be no exaggeration.

Iran’s Supreme Leader, Ayatollah Ali Khamenei, warned that a “harsh retaliation is waiting” for the US, while defense minister, Amir Hatami, confirmed that the strike by the “arrogant US” would be met with a “crushing” response.

Tensions between the two nations are now coming to a head, having been building since 2018 when Trump pulled out of the 2015 nuclear deal and reinstated sanctions that have since devastated Iran’s economy.

But one corner of the market that is benefitting from the escalating conflict is energy, as concerns rise around possible disruptions to the oil supply.

Brent crude jumped by more than 4%, hitting US$69.50 a barrel at one point on Friday. The spike can be attributed to heightened geopolitical risk being priced into oil, even though there has been no immediate, or direct, impact on oil supply from Iran or elsewhere.

That being said, the way in which Iran responds could lead to an actual supply disruption.

A direct attack is a real possibility, keeping in mind that the US blame Iran for attacks on oil tankers last year and for a September rocket attack on Saudi Arabia's oil industry that damaged key oil facilities and temporarily cut the Kingdom’s production by half.

RBC Capital Markets predict that American oil companies operating in Iraq could find themselves "caught in the crossfire" from any further escalation in the conflict — increasing the potential for supply disruptions and higher crude and petrol prices.

Locally, ASX energy stocks as a whole, gained 1.7% on Friday, while Oil Search (ASX:OSH) gained more than 3.2%, Woodside Petroleum (ASX:WPL) gained 0.9% and Santos (ASX:STO) was up 2.3% for the day.

At the smaller end of the energy market, 88E Energy (ASX:88E) had a strong week finishing up around 20% and has now more than doubled in price since its October lows. The higher oil price has helped, as has news that upcoming drilling of the company’s Charlie-1 appraisal well at Project Icewine, on the Central North Slope, Alaska, is on track. 88 Energy announced last week that an ice road construction is about to get underway and the February-scheduled spud is proceeding as planned.

Speaking of the Alaskan North slope, this is a region that increasingly looks to be coming back into favour and could be an area of interest for energy investors in 2020.

In December, the US Bureau of Land Management’s Alaska State Office held its most successful annual lease sale since 2006, receiving US$11.2 million in bids for more than one million acres – a significant lift in interest from the prior year’s bids of just US$1.5 million.

ASX-listed Alaska North Slope junior, XCD Energy (ASX:XCD) picked up four leases in the sale, while US oil major ConocoPhillips (NYSE: COP) and regional exploration pioneer Bill Armstrong’s North Slope Exploration LLC also gained significant tracts. Operators on the North Slope, such as these — along with the wider energy sector — are certainly worth keeping tabs on going forward.


Where to invest $1,000 right now

When the experts at Next Investors have a stock pick, it may pay to listen.

The Next Investors have been investing in ASX small cap stocks for years, with their best small cap picks yielding returns of 1,200%, 1,120%, 900% and 678%.

They have just revealed their hand-picked, FY2021 stock portfolio of high conviction long-term investments.

Click the link below to see what they are currently investing in.


SEE THE PORTFOLIO

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why Finfeed.com is Australia’s leading small cap publication

Founded seven years ago, Finfeed.com is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise.

Finfeed.com provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more.

Finfeed.com is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!

X