Meanwhile, analysts warn that oil price must escalate further: File Image/Pixabay
With analysts inured to the only certainty regarding the U.S./Iran war being uncertainty, oil prices on Friday held steady, with Brent hovering at $105 and West Texas Intermediate at $95 per barrel – but Friday also saw warnings that the market’s demand crunch is about to go global.
Crude was also set for a hefty $15 per barrel weekly gain, amid reviving hopes that a ceasefire was still possible via indirect talks (Iran’s foreign minister was believed to be travelling to Pakistan for negotiations over the weekend; and late on Friday it was confirmed that a U.S. envoy was headed to that country).
Yawen Chen, columnist for Reuters Breakingviews, on Friday stated that the persistent stand-off around the Strait of Hormuz “means both physical and future prices will have to rise again to whatever level deters famously price-resistant oil consumers….at some point, investors will need to stop treating rapidly diminishing inventories and reserves as if they were permanent supply.”
“
Both physical and future prices will have to rise again to whatever level deters famously price-resistant oil consumers
Yawen Chen, columnist, Reuters Breakingviews
Chen blamed investors’ “inability to see how much the status quo is down to rapidly depleting inventories, vanishing demand, and an odd but persistent faith in a lasting deal between Tehran and U.S. president Donald Trump,” and she added that if the Hormuz impasse persists until the end of May, less than 7.4 billion barrels of crude will remain in global storage tanks, fuel depots and emergency reserves.
Chen went on to state, “That might not sound too bad, but only 2 billion of these barrels are in importing countries that are members of the Organisation for Economic Co-operation and Development….and only a fraction of these are government reserves that can be readily distributed.”
Meanwhile, Trump on Friday extended that country’s Jones Act waiver by 90 days, to dampen oil prices by making it easier to move oil, fuel and fertilizer around the U.S.
The Center for American Progress estimated that waiving the Act would decrease East Coast gas prices by a modest 3 cents but potentially raise costs on the Gulf Coast.
As for what will happen in the oil market next, JPMorgan agreed that oil prices will rise further because the market has not yet forced enough demand out of the system to offset the supply loss from the Iran war; instead, analyst Natasha Kaneva pointed out that inventories are being pulled in the wake of spare capacity not working as a relief valve.
Ship & Bunker News Team
To contact the editor responsible for this story email us at [email protected]