Why Oil Is Still Holding Near $100 a Barrel and What Could Happen to Prices Next — Bloomberg
Kyiv • UNN
Oil supplies have nearly recovered, but prices are not falling due to the risks of escalation, low inventories, and expensive transportation. A decline is possible after the situation in the region stabilizes.
Oil supplies from the Middle East have almost returned to the level seen before the start of the US war with Iran, but prices remain near $100 per barrel. The market continues to price in the risk of a new escalation, the depletion of global inventories, and record-high costs of transporting crude, Bloomberg reports, according to UNN.
Details
Even the decision by the G7 countries and their partners to release up to 100 million barrels of oil and diesel fuel from emergency reserves did not trigger a significant drop in prices. According to Bloomberg, the problem is no longer just the amount of oil available—the entire system of its supply and processing has been disrupted.
Global inventories stand at around 4.3 billion barrels—more than 400 million below the March level. At the same time, demand, after an initial decline, has recovered to approximately 104.8 million barrels per day.
The war and the Strait of Hormuz remain the main risks
Traders fear a new escalation between the United States and Iran. Before the war, around 20% of global oil supplies passed through the Strait of Hormuz, and traffic through it remains difficult. The situation in the Red Sea creates an additional risk.
The danger has also caused transportation costs to surge. The cost of shipping oil from the Persian Gulf to China exceeded $1.2 million per day. Therefore, even a recovery in physical export volumes does not mean a return to the previous cost of supplies.
The situation is being worsened by a shortage of finished fuels. Petroleum product exports from two major refining centers—the Middle East and russia—remain limited, in particular because of russia's war against Ukraine. Other refineries are forced to operate more intensively and compete for available crude oil.
What will happen to the price next
The security situation in the Middle East will remain the key factor. If the risk of a new large-scale escalation decreases, traffic through the Strait of Hormuz normalizes, and the world begins replenishing depleted inventories, pressure on oil prices may gradually weaken.
However, the mere return of previous production volumes is not enough. As long as transportation remains expensive, inventories stay low, and shortages of diesel and other fuels persist, the market has several reasons to keep oil prices at high levels.
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