Photo caption: Oil
The war in the Middle East and the oil price surge it caused have destroyed 1.6 million barrels daily in demand, ING commodity analysts said in a note today, adding that this is nowhere near the rate of supply destruction.
Report by Oilprice.com, noted that this has been estimated at between 13 million bpd and 14 million bpd as of late April, according to various sources, including the International Energy Agency. As talks between the United States and Iran remain suspended with on end of the Strait of Hormuz freeze, traders are starting to realize the supply disruption could last for months, pushing benchmarks even higher.
At the time of writing, Brent crude was trading at $123.83 per barrel, after topping $125 per barrel earlier in the day. West Texas Intermediate was changing hands for $109.56 per barrel.
“The oil market has moved from over-optimism to the reality of the supply disruption we are seeing in the Persian Gulf,” ING’s Warren Patterson and Ewa Manthey wrote in their note, adding that “The breakdown of talks between the US and Iran, along with President Trump reportedly rejecting Iran’s proposal for a reopening of the Strait of Hormuz, has the market losing hope for any quick resumption in oil flows.”
The latest reports on the Middle East situation feature an Iranian warning it would take “unprecedented military action” against the continued U.S. blockade of Iranian vessels in the Persian Gulf, as well as President Trump’s latest threat issued on social media, Reuters reported on Thursday. “They don’t know how to sign a non-nuclear deal. They’d better get smart soon!” the U.S. president wrote in a post featuring an image of him with a machine gun and the caption “No more Mr. Nice Guy.”
ING’s commodity analysis team wrote that as the war continues, countries will begin depleting their oil inventories, which would lead to even higher prices, destroying more demand eventually.
