Top oil analyst guarantees that the next few months ‘will be an ongoing, absolute disaster’ even if the Strait of Hormuz opens tomorrow
Energy experts warn that oil futures are completely out of touch with the reality that exists in the physical market, but a showdown is inevitable and imminent, according to a top oil analyst.
Futures markets calmed on hopes for peace talks between the United States and Iran. West Texas Intermediate remains below $100 a barrel for now, but Brent crude is back above that threshold. Meanwhile, stocks are reaching record highs as investors look past the war.
But Paul Sankey, president of Sankey Research, pointed out that pre-war oil shipments by tankers from the Persian Gulf are only now reaching their destinations. With the Strait of Hormuz largely closed for more than 40 days, the lack of new supplies can no longer be ignored.
“This situation will unfortunately deteriorate badly in the coming months,” he said He told Bloomberg TV on Thursday. “We’re locked into this.”
Sankey added that as new oil inflows to the Middle East decrease, countries are depleting their reserves and stock figures are “starting to get scary.”
In fact, unlike typical attempts to make oil market forecasts, he warned that the situation was guaranteed to get worse; These predictions can turn out to be very inaccurate due to external reasons.
“So even if you open the straits tomorrow, we can be sure that the next two months will be an ongoing, absolute disaster because the straits are blocked by tankers and they’re all in the wrong places,” Sankey said.
It examines where supply chains are starting to break down, focusing on jet fuel in Australia and solvents used to make chips in Japan.
Although countries such as Japan and the United States have significant oil reserves that they exploit, subsequent oil releases will become increasingly difficult to absorb as tanks are emptied, Sankey predicted, meaning the remaining volume available to global markets is less than the data indicates.
The moment of truth may come next month. Analysts at JPMorgan said in a note published Tuesday that inventories in trade in OECD countries will reach “operational minimums” between May 9 and May 30, “at which point price increases will become exponential rather than linear.”
The oil supply chain needs time to restart after the war is over. It will take two months for ports to reopen, and tanker crews will wait two to three weeks to feel safe enough to travel through the strait again. JPMorgan also estimates that it will take four months for revived oil production to reach 99% capacity.
