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Oil holds below $200 as US supply and China demand shifts cushion risk
Brent crude averaged about $101 a barrel from Feb. 28 through June 11, after peaking near $126, despite analysts initially warning of $150 to $200 oil if Hormuz supply flows were cut.
Reuters reports that during the US-Iran war that began at the end of February, analysts had warned crude could jump to $150 a barrel or even $200 if around a fifth of global supply transiting the Strait of Hormuz was cut off. Instead, Brent crude futures peaked at about $126 and averaged roughly $101 a barrel between February 28 and June 11, before moving back toward the low-$70s in early July.
According to Reuters, the biggest surprise was China, the world’s top oil importer, which reduced crude imports to the lowest level in nearly a decade by June. The article says China also curbed fuel exports, saw more of its population use electric taxis rather than personal cars, and reduced volumes in its petrochemical sector.
Reuters adds that the United States helped offset the disruption by ramping production to a record 13.93 million barrels per day by April, and by releasing 400 million barrels from the Strategic Petroleum Reserve in March as part of a coordinated International Energy Agency action. The piece also notes that US policy signals around peace and Strait of Hormuz flows have contributed to market volatility and reduced liquidity, as traders are reluctant to take big bullish positions.
The report says funds trimmed Brent futures bullish exposure earlier in July to the smallest level this year, then added the most in six months in the week to July 14. However, it adds that the position was still more than 50% below a late-March six-year peak, with Reuters attributing smaller price reactions to “headline fatigue,” while Saudi Arabia increased shipments from its Red Sea Yanbu port.
Reuters also reports that while Hormuz shipments briefly restarted in June, they fell again in July after fighting resumed, keeping supply risk in focus even as prices remained far below the originally feared levels.
Latest closeWTI crude $79.00 ▼0.8%|Brent $84.94 ▼0.0%