Key facts
- The Strait of Hormuz has been effectively blocked for over three months.
- Oil prices have remained below $100 a barrel, defying forecasts of $200.
- Record US crude and fuel exports have helped absorb lost Middle Eastern supply.
- China's inbound oil shipments have decreased significantly.
- Governments coordinated a release of strategic reserves.
- Global inventories are drawing down at a record pace.
Despite the Strait of Hormuz being effectively blocked for over three months, leading to what is described as the worst supply shock in modern history, crude oil prices have remained below $100 a barrel, defying predictions of prices as high as $200. Several factors are contributing to this resilience: record US crude and fuel exports, a significant slowdown in Chinese demand, and continued, albeit opaque, flows through the strait. Governments also coordinated a substantial release of strategic petroleum reserves. Global oil inventories are drawing down at a record pace, which could make the market more vulnerable to future disruptions. US oil production has reached record highs, enabling the country to act as a key swing supplier. China's reduced imports and the US's increased exports are primary reasons for Dated Brent retreating below $100. However, US inventories are at their lowest in over two decades, and emergency reserves have little left to spare. Russian oil flows to India have also increased significantly due to waivers on sanctions.
Analysts warn that the system is tightening weekly, and the depletion of buffers means the market could lack flexibility in the coming months. The eventual return of China to pre-conflict purchasing levels is seen as a key factor for future price increases.