The world has lost 1.15 billion barrels of oil supply during the recent war, according to analytics firm Kpler. This has left the oil market in a precarious state, with the International Energy Administration’s strategic petroleum reserves at their lowest levels since 1990.
Reopening of the Strait of Hormuz
The Strait of Hormuz has reopened after Iran and the United States signed a memorandum of understanding. However, it may be too late to prevent a crisis, as oil prices may have to go higher again due to the significant loss of oil supply.
President Donald Trump warned of a looming ‘economic catastrophe’ had the strait not reopened, stating that the world would have run out of reserves in about four weeks. The oil market believes Trump’s timing is impeccable, with prices falling after the mid-April ceasefire announcement.
Despite the reopening of the strait, it will take time for oil production to restart and for the flow of oil to return to normal. The world’s oil stockpiles have fallen sharply, with a critical oil hub in Cushing, Oklahoma, hitting its operational stress level.
Industry analysts believe that oil prices have moved too low and that the market is underpricing the risk of effectively running out of oil before the tanks can be replenished. The math checks out, with the International Energy Agency predicting that it would take around a year to get back 1.15 billion barrels of lost supply.
Original reporting: El Paso News (HLL/CB) — read the source article.
