US-Iran Tensions Send Oil Prices Soaring Amid Looming Supply Cliff
Global energy markets have been under uncertainty since the US-Iran peace negotiations expired last month. The two countries exchanged strikes on Monday, sending Brent crude oil futures up 2.7% to $90.52 and gas prices averaging $4.08, a 28% increase from a year ago.
US refineries have been operating near full capacity during the war, processing 17.4 million barrels of crude oil per day in the week ending August 21, the highest level since 2019. However, with Canada scheduled to take 300,000 barrels of daily capacity offline for maintenance this month, many fear a looming supply cliff.
The US would normally offset the closure by tapping its crude oil reserves, but efforts to maintain stability in the Strait of Hormuz have cost the country over 120 million barrels in storage. The Strategic Petroleum Reserve held 286.6 million barrels last week, the lowest level since the early 1980s.
US officials are looking for sanctions to bring Iran back to the negotiating table, while President Donald Trump is promoting an oil deal with Venezuela, which would involve controlling 17 Venezuelan oilfields and boosting output by 1.5 million barrels per day. However, experts warn that it will take significant investments and time for this oil to come online.