Crude Oil is Underpriced, Energy Aspects Says

Oil futures prices are not reflective of the actual situation in the Middle East, according to Amrita Sen, who leads market intelligence at Energy Aspects. The market is not fully accounting for the severity of hostilities and the impact on infrastructure in the region, Sen said. The market's complacency is due to the focus on the mid-term elections and the belief that the U.S. government will lower prices, Sen noted.

The market seems to ignore the real-world impacts of the conflict, such as damage to infrastructure and disruptions to shipping. This complacency has led to an "unprecedented" shipping crisis, with a large tanker fleet stuck in ship-to-ship transfers outside the Strait of Hormuz, pushing global freight rates to record highs and limiting vessel availability for other routes.

The issue is further compounded by the fact that there isn't enough shipping capacity to meet the current demand, according to Russell Hardy, CEO of Vitol, the world's largest independent oil trader. Brent crude prices fell early in Asian trade but held above $100 a barrel and were set for a weekly gain as the number of tanker attacks in the Strait of Hormuz surged in the past week, threatening to halt the rebound in Middle East oil supply.