Oil supplies bounce back, but prices are still high
Oil markets are heading into an unusual period as the Iran conflict remains in dangerous limbo: The supply crunch is easing, but prices could stay stubbornly high. Why it matters: While gasoline prices have dropped lately, don't expect pre-war levels anytime soon even as Middle East exports fitfully recover. Getting oil out of the region is expensive, which filters down to consumers. The threat…
The oil market is experiencing a peculiar phase amid the ongoing Iran conflict, as supply improvements are underway, yet prices are likely to remain elevated. While gasoline prices have decreased recently, pre-war levels are unlikely to return soon, despite the partial recovery of Middle East exports. Transporting oil from the region is costly, which ultimately impacts consumers.
The potential for future attacks poses additional risks, contributing to higher oil prices. Traders are closely monitoring the status of potential diplomatic resolutions and the likelihood of a prolonged stalemate. Yesterday, crude oil prices surged after President Trump suggested on his social media platform that the United States does not need an agreement with Iran.
Currently, crude oil export levels have returned to near pre-war figures at times, but shipping threats persist, particularly in 2027, according to Verisk Maplecroft, a political risk intelligence firm. A resolution to navigating the Strait of Hormuz could be a crucial piece of the puzzle, but its implementation remains uncertain.
The threat of renewed shipping attacks will likely persist as long as the broader conflict over Iran's nuclear and missile programs remains unresolved. Global oil supplies are now outpacing demand for the first time since the Iran war commenced, according to the International Energy Agency. Despite a slight recovery in Persian Gulf region oil exports to 82% of pre-war levels, refined product shipments are lagging behind.
The global market is expected to enter surplus this quarter as supply rises and demand declines due to the conflict. However, elevated insurance and shipping costs continue to exert upward pressure on prices. Experts note that the tanker market's adaptation to Mideast shipping risks accounts for most of the $20-per-barrel year-over-year increase in average costs for oil shipping.
While the current recovery may be nearing its limits, substantial production remains curtailed, refined product shipments are lower, and sustaining exports comes at a high cost. Analysts emphasize that oil exports are not yet normalized, citing the ongoing challenges in the market.
Written by urgent.news from Axios's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
