Oil Prices Face New Test Amid Persistent Supply Gap
Oil prices are facing a new test as a persistent supply gap of 8.3 million barrels persists, despite crude climbing toward $92 on Wednesday. The price increase is attributed to a diplomatic vacuum following the expiration of a 60-day memorandum signed in June between Washington and Tehran.
The Strait of Hormuz remains closed, with eight attacks on vessels transiting the waterway reported so far this month. Iranian forces have intensified hostilities over the past week, which has led to a physical market adapting rather than panicking.
However, the insurance market remains the binding constraint, and restoring flows will take months once it starts. The IEA's August Oil Market Report quantifies the disruption, with global oil supply rising 2.4 million barrels per day in July but remaining 6.3 million below year-ago levels.
The EIA's August Short-Term Energy Outlook raised its Middle East shut-in estimates versus July, assuming severe Hormuz transit constraints persist through August. The agency estimates disruptions accounted for 5.5 million barrels per day of shut-ins in July.