Why $100 Oil Is Hard to Kill
Chevron, Shell and BP Pull Workers From the Gulf Ahead of Hurricane Speculative positioning is already extremely… What I Cover Tsvetana Paraskova is an energy and commodities journalist who has contributed to Oilprice.com for nearly a decade, covering global energy markets, commodities,… Brent Crude oil prices have heldabove $100per barrel for most of the past month despite numerous reports and figures put out in recent weeks by tanker-tracking services and investment banks that crude oil flows from the Strait of Hormuz have recovered, and even exceeded, pre-war levels.
But if so much crude is leaving the Middle East again, why do Brent prices continue to hover around the $100 a barrel mark, up from $60 before the war? Because crude oil flows returning to pre-war levels does not mean that the market has returned to normal.
The price of getting the oil out of the Middle East is astronomically high, with freight rates at record highs.
War risk premiums have jumped as tankers continue to be attacked in the Strait of Hormuz.
Gulf producers have found workarounds to crude flows with alternative routes, which are less efficient, cost buyers more, and take additional weeks to bring crude supply to refiners.
Refiners, for their part, are scrambling to keep processing rates high to seize the record-high refining margins and produce more diesel, which remains the most stressed barrel of oil.
Fuel exports from the Middle East are still limited, Russia’s are non-existent because of Moscow’s ban on diesel shipments, and China is once again protecting domestic supply and curbing fuel flows overseas.
In addition, global inventories have crashed this year as the immediate relief to peak Strait of Hormuz disruptions in April and May was to draw down from crude and fuel stocks.
Inventories, therefore, are so thin that they may not be able to offset another escalation in the U.S.-Iran war.
These are only the operational issues the global markets face ahead of the winter diesel peak demand season.
The geopolitical situation is the biggest unknown for oil prices going forward, and it doesn’t look like the war is ending soon.
Instead, the market fears fresh escalations either before or after 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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