Is The Global Oil Market Just Weeks Away From Imploding?

Experts within the oil arena suggest that the global oil market could reach the point of no return between the end of May and the end of June, if the blockade of the Strait of Hormuz continues into the summer and beyond. Experts are advising that the blockade will reduce the levels of stock of diesel, jet fuel, gasoline and crude oil to critical levels by the end of May, when prices will go through the roof. 

One renowned expert advised that global oil reserves are currently at their lowest levels for eight years driven by trade frictions and refining bottlenecks, even though there are still ample supplies of oil . Estimates suggest that in Europe, and excluding government emergency reserves, commercial jet inventories could, by June, fall below the IEA’s (International Energy Agency) critical 23-day threshold. 

Analysts advise that any buffers to the shortages could well be reduced to zero by the end of June, pushing the price even higher than those predicted at the end of May, reaching levels of circa $200p/bbl or higher. The effect on households all over the world could be devastating as the cost of food increases, petrol and diesel at the pumps could see prices never seen before, and airlines dramatically reduce flights whilst increasing ticket prices.

Indeed, between them, global airlines have cut circa two million seats in May (2% of global aviation capacity) due to the frightening increase in jet fuel. Analysts advise that the most exposed country is the United Kingdom, being the largest net importer of jet fuel in Europe. Refineries in the UK have been requested to maximise jet fuel production under government agreed contingency planning, though the Labour government refused requests by industry to reduce taxes. 

On-going fighting between Iran and the USA has increased today, with Iran bombing a critical oil port in Fujairah, UAE. The longer the war goes on, more critical problems for economies will surface, with inflation in the Eurozone and the United Kingdom expected to move upwards. Hopefully, an end to the confrontation can be found soon, otherwise global economies, industry and households will all begin to suffer. Experts advise that families and businesses who intend to fly in the coming months should book early to avoid potential disappointment.