Source: Wall Street News
Author: Bu Shuqing

Oil supply disruptions caused by the geopolitical crisis have intensified, and the era of three-digit oil prices is rapidly returning.

The latest evidence is that military tension between Israel and Iran directly caused Brent crude to break through the $90 mark last Thursday and continued to rise on Friday. Since March, Brent crude has surged more than 10% cumulatively.

In addition, Mexico's oil exports fell 35% last month to the lowest level since 2019, and are expected to decline further in the future; US sanctions on Russian ships have left oil cargo stranded at sea, and Venezuela's oil supply may become the next target; Yemen's Houthi attack on Red Sea tankers hindered crude oil transportation; and OPEC+ continues to maintain its decision to cut production.

All of these factors combined to cause a certain amount of disruption in global oil supply, which was beyond the expectations of traders.

“The bigger driver right now is supply issues,” Amrita Sen, founder and research director of Energy Outlook Ltd., said in an interview with the media. “We have seen some supply shortages, yet global demand is generally healthy.”

J.P. Morgan predicts that oil prices may rise back to $100 per barrel by August or September of this year as the tight supply situation intensifies. Oil prices well above $90 may cause a decrease in global demand, which in turn will cause prices to fall. Currently, however, there are few signs that this is the case.

Additionally, soaring oil prices may eventually force OPEC+ to reconsider some production reduction decisions, said Vikas Dwivedi, a global oil and gas strategist at Macquarie Group.

“Without a doubt, this is a market with very strong fundamentals. I think a $100 oil price is entirely possible—it only requires more risk pricing on real geopolitical risks,” Bob McNally, founder of Rapidan Energy Group and former White House adviser, said in an interview with the media.

Editor/Jeffy