Global Oil Security Looks Shakier as Conflicts Hit 45 Million Bpd of Supply
Another Tanker Struck as Hormuz Shipping Crisis Deepens Global battery-storage capacity surged to… What I Cover Irina Slav has been writing about global energy markets since 2007, covering the oil and gas industry, energy security, commodities, and the… Almost half of the world’s oil supply is produced in regions currently engaged in hot conflicts, Reutersreportedthis week.
The situation raises questions about long-term oil supply security and the limits to diversification.
The Middle East, of course, is the most obvious and most disruptive example.
While oil prices on speculative markets have remained capped by trader optimism, the physical supply of the vital energy commodity has been severely compromised, leading to rationing and emergency releases from storage across the world.
Meanwhile, Ukraine is pursuing a campaign of bombing Russian refineries with drones in a bid to persuade Moscow to make concessions regarding their conflict.
So far, this has not happened, but the drone attacks have resulted in fuel shortages that have sent a ripple effect beyond the Russian borders because the country was the world’s second-largest fuel exporter after the United States.
The Gulf states, by the way, were also, together, large exporters of refined fuels, which is why many analysts are now warning that the crisis in fuels is the one that needs to be addressed, not the situation in crude oil.
Addressing it, however, would be quite difficult because the world’s refining capacity has shrunk considerably over the past decade or so, specifically in Europe, which is now struggling with the consequences of those developments, with diesel prices 70% higher than they were in February due to the continent’s dependence on imported fuels.Related: Natural Gas, Not Oil, Is Key Inflation Concern in Europe Over the past couple of months, the Middle Eastern conflict has also expanded, as it tends to happen in the region, with another major oil chokepoint under threat from attacks by the Yemeni Houthis.
Indeed, attacks have already taken place, forcing shippers to re-route to alternative channels, such as the Suez Canal.
This means longer journeys for tankers, which adds costs to the final price of the cargo, on top of the war premium already crushing demand in poorer countries.
The latest reports from the Middle East once again pushed oil prices lower,sayingthat Iran and Oman were discussing joint management of the Strait of Hormuz.
The discussions were perceived as a sign the waterway could be reopened soon, despite Iran’s threat to not let a drop of oil out of the Persian Gulf if the U.S.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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