Despite a drop in prices on Friday, suggesting investors still hope for a swift end to the conflict, the global oil market is moving rapidly towards a critical turning point.
According to a report by the Financial Times, major oil traders warn that within the next four weeks, inventories could fall to dangerously low levels, raising the risk of a sharp spike in prices and significant consequences for the global economy.
At the centre of concern is the continued blockage of the Strait of Hormuz, which is severely restricting oil flows and eroding already strained fuel stockpiles, from petrol and diesel to jet fuel.
Risk of a sharp price surge
Analysts and market participants caution that by the end of May, global inventories could reach critical thresholds, beyond which prices may rise rapidly.
“We do not have months, we have weeks,” said Frédéric Lasserre, head of research at Gunvor, one of the world’s largest oil traders, warning of “tremendous pain” for the economy.
He noted that the impact would go beyond higher fuel costs for consumers, extending into industrial production, with companies potentially forced to scale back or even halt operations, raising the risk of recession.
“The point of maximum strain is clearly June. Something will have to give,” he added.
Scenarios of oil at $200
Amrita Sen, head of Energy Aspects, offered an even more stark assessment, warning that if the conflict continues until the end of June, inventories could be fully depleted.
In such a scenario, she said prices could reach virtually any level, with projections placing Brent crude between $150 and $200 per barrel.
Prices have been highly volatile this week, hitting four-year highs above $126 before falling back below $110.
Market expectations shift
Initially, markets had priced in a short conflict following the outbreak of hostilities in late February. That assumption is now being rapidly reassessed.
Helima Croft of RBC Capital Markets said investors are beginning to recognise that expectations of a “short war” may not reflect reality, with the possibility of the crisis extending into the summer gaining ground.
If the disruption continues through May, prices could surpass 2022 highs, approaching or exceeding $140 per barrel.
The buffer is fading
So far, the market has absorbed some of the pressure thanks to stockpiles built up before the conflict and the release of strategic reserves, particularly from the United States.
However, that buffer is gradually diminishing. Recent data show a significant drawdown in inventories, even with daily releases of around one million barrels from US strategic reserves.
US petrol stockpiles have fallen to their lowest seasonal levels in more than a decade, reaching 222 million barrels at the end of April, with the critical threshold estimated at around 210 million.
A high-risk summer ahead
The situation is becoming more fragile as the market enters the high-demand summer period, especially in the United States, where fuel consumption peaks due to increased travel.
Industry executives warn that the combination of rising demand and shrinking inventories is creating a highly volatile environment.
Global economic risks intensify
Against this backdrop, developments in the Middle East, particularly around the Strait of Hormuz, have become the decisive factor for markets.
If oil flows are not restored in time, a surge in prices could hit global growth, fuel inflation and potentially trigger a new phase of economic slowdown or even recession.
In short, the oil market is not merely under pressure. It is approaching a tipping point that could shape the trajectory of the global economy in the months ahead.
Source: naftemporiki.gr