$120 Brent Crude Becomes a 'Live' Consideration as Middle East Disruptions Intensify
Oil prices may soon test $120 per barrel as supply disruptions in the Middle East, falling inventories, and widespread refinery constraints erode buffers that previously contained oil prices.
Analysts at PVM Oil Associates say that alternative shipping routes and strategic petroleum reserve releases are no longer effective in preventing severe price spikes. The Strait of Hormuz has been a major concern, but the workarounds put in place initially have lost their effectiveness.
John Evans, an analyst at PVM, notes that Saudi Arabia's East-West pipeline, which provided a critical alternative route for oil exports, has been temporarily shut down due to Houthi attacks. This comes as hopes for a diplomatic breakthrough over Hormuz have faded following the postponement of planned talks between Gulf nations and Iran.
Tamas Varga, also an analyst at PVM, says that in the absence of any breakthrough, the downside is limited, and oil stocks will not be replenished anytime soon. Refining constraints are adding pressure to the market, with disruptions to Russian refining capacity, high utilization rates in the US and India, and constrained refining activity around the Persian Gulf contributing to a tightening market for finished fuels.