Why oil prices have defied US$200 forecasts despite Hormuz closure
An oil glut, emergency release of reserves, a US shale boom and China’s absence in the market have played a part
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A CURIOUS thing happened to the price of crude oil after the outbreak of the Iran war – it has not skyrocketed despite the closure of the Strait of Hormuz and the US naval blockade.
Brent crude, the global benchmark, was trading at about US$96 a barrel on Wednesday (Jun 3). This price is well below the dire forecasts of US$200 expected by analysts when the US and Israel struck Iran on Feb 28.
One reason is that there was an oil glut before the war. In January, Brent was trading at about US$66 a barrel. Furthermore, when the war broke out, many barrels of oil were already being shipped to their destinations.
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