Lead
Oil has again touched $100 a barrel after fresh US strikes on Iran dashed hopes of a Middle East breakthrough, with experts saying that whatever the outcome of peace talks, the global energy market may now be past the "point of no return".
News of the US attacks on missile launch sites and mine-laying vessels pushed the price of Brent crude past the key threshold on Tuesday, before it eased back to about $99. The conflict and resulting blockade of fossil fuel shipping through the strait of Hormuz have sent oil soaring, topping $126 at the end of last month.
However, in recent weeks prices have remained significantly below predictions as traders have continued to bet on a diplomatic solution to hostilities that could allow Gulf states to restart production and exports of crude.
Coverage comparison
The Guardian's reporting has focused on both the immediate market reaction and the broader structural pressures building beneath the surface. One article highlighted the price surge and market volatility in the wake of the US strikes, while another examined the deeper fragility of the energy system, noting that prices have "bounced about $100" since Iran closed the strait of Hormuz.
Market observers say weeks of disruption to oil exports have heavily eroded global stockpiles of crude and fuel, while demand for transport fuels is expected to increase over the summer travel season. Analysts at HFI Research said last week that the market had "reached the point of no return" and could be due a "rude awakening" by the start of next month.
"It just seems to be this endless loop of Charlie Brown and Lucy with the football," said Michael Every, a global strategist for economics and markets at the Dutch lender Rabobank. "Every single time, it's 'oh, this time is the breakthrough. This time, the energy will flow.' And at any one given time, it could be right. But so far, repeatedly, it hasn't been."
The head of the International Energy Agency, Fatih Birol, said last week that the world could hit a "red zone" in July and August by using far more oil than countries were producing, meaning further emergency measures may be required.
Key claims
- Oil prices have bounced around $100 since Iran closed the strait of Hormuz, according to The Guardian's reporting.
- The International Energy Agency (IEA) has warned of a potential "non-linear adjustment" in the energy market.
- A record coordinated release of strategic oil reserves has helped ease supply constraints.
- The shutdown of the strait of Hormuz has cut 14.4 million barrels of oil a day from the Gulf's prewar output.
- The US has been relatively insulated from the impact of the oil shock as a net exporter of crude.
- American consumers have paid an extra $40 billion in gasoline costs since the war began.
- Gas reserves in Europe are under pressure, with stores currently only 37% full.
- The average price of petrol in the UK is at its highest level since the Middle East conflict started.
Despite these pressures, several factors have helped to ease potential supply constraints, including a record coordinated release of strategic oil reserves, rerouting of some Gulf production to pipelines bypassing the strait, and a rapid fall in imports to China, which some analysts believe may reflect Beijing drawing down stockpiles.
Yet the IEA, whose executive director Fatih Birol has been sounding the alarm from the start, said last week that oil stocks are being depleted at a record rate. Several analysts have issued warnings in recent weeks that the point may be fast approaching when they drop to crisis levels.
That could push prices so high as to cause "demand destruction" – the falling back of consumption to meet constrained supply – on a scale much more economically damaging than anything we have yet seen.
Hamad Hussain, who covers climate and commodities for the consultancy Capital Economics, warned recently: "If the strait remains effectively closed and commercial oil inventories in the OECD continue to be run down at the same pace as they were in April, oil stocks could reach critically low levels by the end of June." He suggested that that could push Brent crude prices to $130-$140 a barrel.