Crude oil is now trading above US$100 ($138.52) a barrel, up 3%. The continued conflict in Iran is putting further pressure on prices, particularly following recent Houthi attacks on Saudi Arabia. Oil is now at its highest level since July.
This is happening even though physical barrels appear to be transiting out of the Strait of Hormuz.
Another reason is that Chinese buyers are returning, as ANZ Group Holdings (ASX:ANZ) showed yesterday:
China acted as a key swing consumer during the initial phase of the Iranian disruption and used its extensive inventory levels to moderate the global impact.
It is now coming back into the spot market to replace its lost Iranian supply.
The market may also be watching declining levels in the US Strategic Petroleum Reserve, which has fallen to 285.4 million barrels, its lowest level since November 1982.
Analyst Porter Stansberry says:
“The United States has more protection than Europe or Asia from the energy disruption because the US produces 13.6 million barrels of crude a day and exports crude and refined products, and the US Gulf Coast holds some of the world’s most capable refineries. But those advantages do not seal the borders.
“Diesel trades in a global market, and American refiners sell wherever the net price is highest. We entered September with a record-low 19.3 million barrels of distillate inventory on the East Coast, while total US stocks stood at 104.2 million barrels, the lowest August level since 1982.”
Some good news came via Reuters last week, which reported that Chinese exports of petroleum products are also increasing. This takes some pressure off the diesel market, which is currently under the most stress. Since last year, the global refining system has lost around five million barrels per day of capacity due to attacks linked to the conflicts in Iran and Ukraine.
ANZ Senior Commodities Analyst Daniel Hynes says flows from the Persian Gulf are unlikely to return to pre-war levels anytime soon, while there appears to have been little progress on the proposed deal between Iran and Oman that the market had expected earlier in the week.
Write to Callum Newman at Mining.com.au
Images: Unsplash
