Summary: The Israel-Iran conflict came out of the shadows when Israel attacked the Iranian consulate in Damascus on April 1, and Iran retaliated this weekend with a drone, cruise missile, and ballistic missile strike on Israel. Iran has signaled that their action has concluded, but Israel has indicated it will retaliate, so the possibility of an escalation of military conflict in the region has increased notably. The Biden Administration will try to stay Israel’s hand or at least argue for a limited response, if any. Still, this means the energy security premium on crude prices will stick and perhaps increase.
With that in mind, we believe energy security concerns have now tipped the balance in favor of renewing the GL44 license (or a modified version) later this week. The license allows the development and export of Venezuelan crude by selected companies and PdVSA. The Biden Administration has been leaning in this direction to address the humanitarian crisis in Venezuela, perhaps stem Venezuelan migration and contain gasoline prices in an election year.