Iran's Leverage on Oil Prices Revealed

Brent crude has not rallied to $150 per barrel or higher due to an unexpected source of oil supply, according to Bjarne Schieldrop, Chief Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB).

In a recent report, Schieldrop explained that the loss of crude supply through the Strait of Hormuz is being compensated by different elements, including a 'crude escape' of 5 million barrels per day from the Strait.

These calculations also take into account increased exports from Yanbu, reduced Chinese crude imports, and an OECD SPR crude discharge. The net balance is a positive 0.1 million barrels per day, according to Schieldrop.

Schieldrop warned that if Iran were to shut down the two key elements of oil supply - the 'crude escape' and Saudi Arabian redirection of 3 million barrels per day to the Red Sea - the market would be in a significant deficit.