19.8 million barrels of oil stuck in the Middle East - US administration updates data. Expects demand to fall, prices to rise
The US Energy Information Administration revised its previous forecasts to reflect a much larger and longer-lasting hit to global oil supplies from the war with Iran.
Energy analysts have found it difficult to predict the duration and depth of disruptions to oil markets from the Middle East war, especially as US President Donald Trump has issued contradictory statements, one day claiming the war could end within weeks but then threatening to fight until he returns Tehran to the "Stone Age."
The agency said it now expects the Strait of Hormuz to remain closed until the end of May, reversing its previous assumption that the closure would last until April. In addition, the agency estimates that about 10.5 million barrels of oil were blocked across the Middle East in April, with production set to peak at 10.8 million barrels per day this month as storage tanks in the Middle East reach maximum capacity. The increase is in part because the agency expects Iran to be forced to cut oil production due to the U.S. blockade of the country’s exports through the Strait of Hormuz.
The agency forecasts that global oil inventories will fall by 2.6 million barrels per day this year, from its previous estimate of a draw of about 300,000 barrels per day from reserves. Brent crude prices will average about $106 per barrel in May and June, before falling to an average of about $89 per barrel in the fourth quarter of this year as production in the Middle East begins to recover. If the Strait of Hormuz remains closed until June, a month longer than currently assumed, oil prices will be about $20 per barrel higher in the short term compared with current forecasts.
The agency also lowered its forecast for global oil demand. Global oil demand will now grow by about 200,000 barrels per day this year, down from last month's forecast of 600,000 barrels. "We expect higher prices to lead to a reduction in oil demand, which will help move the market towards equilibrium," the agency's experts said.
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