Crude oil price don rise back above $100 per barrel on Tuesday, after fresh US strikes on Iran dash hopes for peace deal for Middle East. Experts dey talk say peace talks appear stuck for ‘endless loop’, and di global energy market fit don pass ‘point of no return’.
Di US attacks on missile launch sites and mine-laying vessels push Brent crude price past key threshold as peace deal remain elusive. Di conflict and blockade of fossil fuel shipping through Strait of Hormuz don make oil soar, topping $126 at end of last month.
But for recent weeks, prices stay significantly below predictions as traders continue to bet on diplomatic solution to hostilities wey fit allow Gulf states restart production and exports of crude. On Monday, Brent dey trade at about $97 per barrel.
Market observers say weeks of disruption to oil exports don heavily erode global stockpiles of crude and fuel, while demand for transport fuels dey expect to increase for summer travel season. Analysts at HFI Research last week say di market don ‘reach point of no return’ and fit dey due for ‘rude awakening’ by start of next month.
Every single time, dem dey talk say ‘oh, dis time na di breakthrough’. And at any one given time, e fit be right. Di head of International Energy Agency, Fatih Birol, last week say di world fit hit ‘red zone’ for July and August by using far more oil than countries dey produce, meaning further emergency measures fit dey required.
Dat same day, Saudi Aramco, di state-controlled oil firm, predict say if Strait of Hormuz remain closed for further weeks, ‘oil supply challenges’ go affect market until next year. Record draws from emergency oil stockpiles don help plug dis shortfall by about 2 million barrels per day, but these releases dey expect to end by July and inventories already ‘critically low’, according to US investment bank JP Morgan.
Despite sharp cuts to demand, there still dey substantial shortfall for crude supplies to market. Di market continue to watch for US-Iran agreement to resume flows through di strait, but even for blue-sky scenario with flows normalising, di market go remain tight with inventories critically low, JP Morgan tok.
For Europe, gas reserves dey under pressure, HSBC tok, with stores currently only 37% full, well below five-year average of about 50% for dis time of year. Injections of gas into storage facilities dey well below normal levels, partly because market price no dey reflect di market tight supplies. For our view, dis seem to reflect market complacency to some degree, HSBC tok.
Higher oil prices already dey feed through at di pumps. On Wednesday, di cap on typical dual-fuel costs for Great Britain dey forecast to increase by nearly 13% as result of higher gas prices caused by di Hormuz blockade, wey fit cost average household extra £209 per year.
