Crude Price Dip Masks Deeper Supply Crisis Ahead of US Midterms
The price of crude oil is not reflecting the true supply reality in the Middle East, and this discrepancy can be felt by the U.S. midterms.
Oil prices have dropped below $90 due to a lack of military strikes or attacks over the past few days, but this does not necessarily indicate a decrease in global crude supplies.
Trade takes time to flow, and recent disruptions in the Strait of Hormuz and Bab el-Mandeb Strait are causing delays in oil shipments. The last regular cadence of oil out of the Port of Yanbu left seven days ago, and it will take weeks for that oil to arrive at its final destinations.
The newly rerouted tankers avoiding the Bab el-Mandeb Strait will add 60 days to transport time for oil headed to Asia. This increased transit time is also causing logistical difficulties due to the need to transfer oil from large vessels to smaller ones, which can then travel through the Suez Canal.
Energy analysts say that markets are uncertain about how this situation will unfold and are concerned that commercial inventories could be drawn down to minimum operating levels, causing a price spike.