Oil Supply Disruptions Widen Market Deficit Amid Tight Physical Supplies

S&P Global Energy's Pulkit Agarwal warns that continued disruptions in oil supplies from producing countries could widen the existing supply deficit. This situation is unfolding amidst tight physical supplies, geopolitical developments, and changing demand.

The global oil market remains under pressure due to these factors, with oil prices having moved through several peaks and declines as markets assess when ongoing conflicts will end and normal oil flows can resume.

Although some oil is still flowing through the Strait of Hormuz, limiting a sharper rise in prices, Agarwal notes that the global oil market remains tight. Physical oil supplies remain tight, with some challenges particularly visible in refined products like diesel, which has record cracks.

Agarwal emphasizes that oil prices are influenced by several factors beyond current supply, including demand response to price, expected future supply, and the chance of a deal. He also notes that Russian crude has remained an important part of India's oil demand equation since the Russia-Ukraine conflict began in 2022.