The price of Brent crude oil has remained above $100 per barrel for most days of the past month. Despite numerous reports and statistics released by tanker tracking services and investment banks, the flow of crude oil from the Strait of Hormuz has improved and even surpassed levels prior to the U.S. military incursion into Iran.
Operational Challenges and Transportation Costs
The return of crude oil flow to pre-war levels does not mean a return to normal market conditions. The cost of transporting oil from the Middle East has significantly increased, and shipping rates have reached their highest levels. This has led Gulf producers to turn to alternative routes for maintaining crude oil flow, which are less efficient and incur higher costs for buyers.
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Refineries are also trying to keep refining rates high to capitalize on unprecedented refining margins and produce more diesel. However, fuel exports from the Middle East remain limited. Russian exports have been halted due to bans imposed by Moscow, and China has also restricted fuel exports abroad to maintain domestic supply.
Decreasing Reserves and Political Risks
Global reserves have sharply decreased this year, and the level of reserves has fallen to a point where there may not be enough capacity to compensate for any future disruptions. These factors and the geopolitical situation have contributed to rising crude oil prices. As markets lack sufficient reserves and buffers to absorb new shocks, crude oil prices continue to include additional risk premiums.
Ole Hansen, head of commodity strategy at Saxo Bank, stated regarding the outlook for the release of oil reserves that a sustained decline in Brent oil prices requires broader normalization of conditions. The G7 also announced the release of 100 million barrels from crude oil and diesel reserves. However, the market remains volatile due to uncertainty about the actual quantity of these 100 million barrels.
Given these challenges and developments, it seems that the price of Brent oil will remain around $100 in the near future.
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