Rise Due to War, Fall Due to OPEC, How Come?
Short and medium term predictions for crude oil prices will still increase with several supporting factors from geopolitics that still provide support. The conflict in the Middle East between Israel and Iran has entered its sixth day, triggering concerns about disruptions to oil supplies through the Strait of Hormuz, a vital route for global exports, where if there is a closure or blockade of this strait it could increase distribution costs which would cause prices to increase even further.
Geopolitical sentiment strengthens short-term bullishness, pushing prices up but the increase is still restrained by the widening global surplus. The IEA report said that despite the conflict, global supply still exceeds demand—projected to increase by 1.8 million b/d in 2025 (total 104.9 million b/d), while demand is estimated to only increase by 720 thousand b/d. OPEC+ & non-OPEC production outpaces consumption, and oil stocks have risen by ~1 million b/d since February, adding to the surplus, while OPEC+ is implementing a plan to increase output by an additional 411k b/d since May and likely to continue into July—despite ongoing Middle East conflicts. Medium-term and long-term supply pressures remain bearish—although geopolitical risks are supporting prices now.
So the price increase projection is more towards the short term, but the increase is still limited due to the amount of supply and the planned increase in production from OPEC+, while the medium-term and long-term projections are still more towards a decrease due to the amount of supply which is predicted to remain higher than demand for this year.
Source: (mrv@Newsmaker)
