Despite Today's price drop, which reveals that investors are still hoping for a rapid end to the war, the global market oil heads at speed towards a critical «turning point».
According to reports from the Financial Times, major oil dealers warn that within the next four weeks stocks will fall to dangerously low levels, clearing the way for abrupt price ejecting and serious effects on the global economy.
At the heart of concern lies the continuing blockade of the Straits of Ormuz, which drastically limits oil flow and erodes already pressed fuel reserves, from petrol to diesel and aircraft fuel.
Risk visible «explosive» climb
Analysts and market players warn that by the end of May world reserves may reach critical levels, which will start to increase rapidly.
«We don't have months, but weeks at our disposal.», notes features Frederic Lasser, head of research at Gunvor, one of the world's largest oil dealers, warning about «great pain» in the economy.
As he explains, the effects will not be limited to the cost of fuel for consumers, but will be extended to industrial production, with companies forced to limit or even shut down their operation, potentially leading to a recession.
«The suffocation point is clear in June. There's got to be something broken.», points out.
Scripts for prices up to $200
Even more dramatic is the assessment of Amrita Sen, head of Energy Aspects, which warns that if the war is extended by the end of June, stocks may be completely depleted.
In this scenario, as he notes, «can imagine any level of prices», with predictions to place Brent even in the range of $150 to $200 a barrel.
Already, within the week, prices recorded high four years, surpassing $126, before retreating back below $110, to a heavily volatile market.
It changes the story of the war
Initially, the market had discounted a brief conflict after the start of hostilities in late February. However, these expectations are rapidly being revised.
As RBC Capital Markets's Helma Croft points out, investors are beginning to realize that the message for one «short war» may not reflect reality, with the possibility of prolonging the crisis until summer gaining ground.
Should the blockade continue in May, it is not excluded that prices exceed even the highs of 2022, approaching or exceeding $140.
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The «pillow» deflates
To date, the market has managed to absorb some of the pressures thanks to stocks that had accumulated before the start of the war, but also through the release of strategic reserves, mainly from the US.
However, this «pillow» Slowly, slowly, slowly. The latest figures show a significant drop in stocks, even with daily channels of about 1 million barrels from the US strategic stocks on the market.
Indicative is that gasoline reserves in the US have retreated to the lowest seasonal levels for over a decade, reaching 222 million barrels at the end of April. — with «red line» be placed close to 210 million barrels.
High risk summer
The timing makes the situation even more fragile, as the market enters the high demand period of summer, particularly in the US, where fuel consumption peaks due to movements.
«We're entering the danger zone.», warn market officials, pointing out that the coexistence of increased demand and reduced stocks creates an explosive mix.
Risk to the global economy
In this environment, the development of the conflict in the Middle East and especially the situation in the Straits of Hormuz is highlighted in the determining factor for markets.
If oil flows are not restored in time, price ejecting may hit growth critically, boost inflation and lead to a new wave of economic slowdown or even recession.
In other words, the oil market is not just under pressure — is one step ahead of a turning point that can determine the course of the global economy over the coming months.
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