Oil market at ‘tank bottoms’ in Asia, Europe isn’t far behind: Carlyle
Abu Dhabi National Oil Co. in Al Ruwais, United Arab Emirates. Cracked towers stand next to access roads at the Ruwais refinery and petrochemical complex operated by (ADNOC).
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Underscoring the global energy shock caused by the Iran war, oil markets in Asia are approaching minimum operating levels, likely to be followed by Europe and the United States potentially facing shortages by July, Jeff Currie, Carlyle’s chief strategy officer for energy pathways, said Monday, underscoring the global energy shock caused by the Iran war.
Currie warned that headline global inventory figures could be misleading because most of the oil stored around the world is not immediately usable.
The majority of this oil is needed to ensure the safe operation of pipelines and storage systems, leaving only a smaller share to market. Asia is already close to these so-called “minimum operating levels,” Currie told CNBC on the sidelines of the UBS Wealth Conference in Singapore.
Global oil markets have been under pressure since the outbreak of the Iran war earlier this year, after shipping disruptions in the Strait of Hormuz sharply restricted energy exports from the Middle East.
Europe will be next. We think Europe will start to have problems for a while after this public holiday.
Jeff Currie
Carlyle, chief strategy officer for energy routes
“We’ve seen explosive prices on products. Jet fuel has dropped, but diesel is now above jet fuel. So the problem in Singapore continues. It’s switched from jet to diesel,” Currie said.
The current relief in oil flows in the U.S. may be temporary, and Europe could begin to face similar tensions within weeks as the summer driving season begins. “Asia, I’d say you’re there. Europe, wait another month or so and wait for July to cause trouble in the United States,” Currie said.
“All stocks originating in the United States from the US SPR [Strategic Petroleum Reserve] “It’s exported to Europe, so the Europeans think they don’t have a problem because they import all of this oil from the United States, but it can’t continue like this.”
His comments follow recent warnings from the International Energy Agency that the global oil market could face a critical supply squeeze during peak summer consumption if exports, particularly in the Middle East, do not recover and stocks continue to fall.
“If we do not see some improvements in the situation, we may enter the red zone in July or August,” IEA chief Fatih Birol warned last week.
Carlyle’s Currie rejected proposals such as suspending the US federal gasoline tax as insufficient to address the underlying supply shortage.
“This doesn’t solve any of the problems. The only way to solve this problem is to increase the availability of molecules,” he said, referring to physical oil supply. While statements from the U.S. SPR provided some relief, Currie said market pricing showed underlying shortages remained severe.
Oil prices since the beginning of the year
Ultimately, reopening the Strait of Hormuz remains the only permanent solution, but even this will take time to normalize markets, Currie said, arguing that the contraction in global stocks also strengthens Iran’s influence in ongoing negotiations.
US President Donald Trump asked his team on Sunday not to reach a deal with Iran, which is rushing to end the war and reopen the Strait of Hormuz.
“Iran’s negotiating power is increasing day by day. Why? Because oil stocks and inventories continue to fall,” he said. “The moment you think you’ve won is probably the moment you realize you’ve lost, and negotiating positions on this point have never been stronger in the last 47 years.”
