After plummeting toward $70 per barrel early in July, Brent crude oil soared again amidst the latest escalation in the Middle East and is threatening to reclaim highs above $100.
Specifically, a series of Iranian attacks on vessels allegedly transiting the Strait of Hormuz without authorization led the U.S. forces to unleash explicitly punitive air raids on the country and, in turn, led the Islamic Republic to launch missiles against neighbouring countries hosting American assets and personnel.
Considering the continued importance of the narrow waterway for the global supply chains, Brent crude oil has soared to $88.26 by press time, and the average gas price in the world’s leading superpower back to $4 per gallon.
The escalation simultaneously raised the odds of the commodity crossing above $100 per barrel for the first time since May, with many observers fearful that the previous dire forecasts of even more extreme prices will finally come to fruition.
Why is the oil price headed above $100
Indeed, between increased exports from unaffected regions, the global strategic reserves, and – as some allege – deliberate market manipulation executed during low-volume hours, the world has, so far, evaded a catastrophic surge in the cost of black gold.
By late July, however, continued stability appears unlikely to be maintained barring a more permanent ceasefire or peace deal between the U.S. and Iran as the American strategic reserve plummeted to 40-year lows earlier in the month.
Overall, the stockpile – authorized to hold 714 million barrels – more than halved to 316.5 million, per a July 15 MarketWatch report. Furthermore, it dropped by 3 million barrels in the week that ended on July 10.
Should an equivalent reduction rate be maintained, the U.S. could see its reserve completely empty within just over 100 days. Simultaneously, more recent reports indicate that there may be only roughly 43 days left given the recent escalation.
Is peace between the U.S. and Iran imminent as stockpiles allegedly run dry?
Meanwhile, the dire military state in the Middle East and the economic situation in North America offer some cause for cautious optimism.
On the one hand, some U.S. sources reportedly indicated that the increased Iranian missile launch rate is a sign that the Islamic Republic is running out of ammunition and is attempting to cause as much damage before its guns fall silent.
On the other hand, critics of the Republican administration believe that a new ceasefire will soon be announced due to President Donald Trump not being able to afford the strategic reserve running dry – especially mere months ahead of the midterms.
Still, neither side has taken a conciliatory tone by press time, and, barring a sudden turn toward de-escalation, oil is most likely to soar above $100 and, possibly far higher, given the alleged discrepancies between the relatively tame paper and steep physical prices during the previous hot phase of the conflict.
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