Thursday, July 4, 2024

Gulf peace doesn’t halt petrol price rise

In recent weeks, oil markets have shown relative stability despite geopolitical tensions and supply disruptions. The recent missile attack from Iran towards Israel had minimal impact on prices, with Brent crude hovering around $90 a barrel. However, traders expect prices to climb higher in the summer as demand increases and supply remains tight.

Geopolitical risks, including conflicts in the Middle East and tougher sanctions on Russia, have contributed to the 25% increase in oil prices since December. Supply disruptions in countries like Mexico, Scotland, Libya, and South Sudan have further constrained global supply. Additionally, OPEC+ has extended its production cuts, leading to a deliberate reduction in output.

On the demand side, robust economic activity in major economies like the US, China, and Europe is driving up the need for oil. The International Energy Agency predicts a 1.2 million barrel per day increase in global crude demand this year, surpassing previous expectations. With global oil stocks already falling, the outlook for the summer suggests further tightening.

Looking ahead, if OPEC+ maintains its production cuts, oil prices could potentially reach $100 per barrel in the coming months. However, this outcome may not be desirable for the cartel as it could dampen demand and push petrol prices higher in consumer markets. The balance between maximizing revenue and ensuring market stability remains a key concern for OPEC+ members.

In the face of potential escalations between Iran and Israel, the overall impact on oil prices is expected to be limited. Any disruptions in Iran’s oil exports could be offset by increased production from other OPEC members. Even in a worst-case scenario where Iran disrupts the Strait of Hormuz, the impact on global prices may be temporary.

Overall, the consensus among experts is that oil prices are likely to remain at current levels, providing stability for the global economy. While prices may not decrease significantly in the near term, they are expected to stay within a range that is manageable for both producers and consumers. However, the impact on American voters, who closely monitor petrol prices, remains a factor to watch in the coming months.

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