Stock drawdowns, alternative routes and suppliers, and agile refiners have all contributed during the crisis, avoiding far more severe impacts on demand
Global energy markets have been contending with their largest supply disruption in history resulting from the near closure of the Strait of Hormuz, a vital artery for oil and gas shipments to reach global markets. The cumulative oil supply losses from producers in the Middle East now exceed 1.3 billion barrels, with flows through the Strait of Hormuz falling from around 20 million barrels per day prior to the conflict to an average of 2.7 million barrels per day in March, April and May.
Since the start of the war in the Middle East on 28 February, the huge drop in the number of tankers shipping oil and gas from Gulf producers through the Strait of Hormuz has severely dislocated oil market flows, not only for crude oil, but also for petrochemical feedstocks, liquefied petroleum gas (LPG) for cooking, and middle distillates such as diesel and jet fuel. As the crisis intensified in early April, the North Sea Dated international crude oil benchmark reached an all-time high of $144 per barrel – more than double its pre-war levels, with even steeper gains recorded for jet fuel and diesel.
Prices have since eased significantly as demand has fallen sharply, and on increased optimism that a deal would be reached to enable more regular shipping flows through the Strait. The new agreement last week between the United States and Iran, which aims to reopen the Strait and provide the foundation for a lasting peace, is a crucial breakthrough on this front, with signs of exports already increasing since the deal was agreed. (....)