Three and a half months after the closure of the Strait of Hormuz cut 13 million barrels per day from global oil supply, prices remain below $100. This price ceiling has been sustained not by improved supply but by temporary measures from China, the United States, and other developed economies. China reduced crude imports to their lowest level since October 2017, relying instead on strategic stockpiles and reduced refinery activity. At the same time, the U.S. ramped up crude and fuel exports by about 1.8 million barrels per day above year-ago levels, drawing from domestic inventories rather than new production. Coordinated releases from strategic petroleum reserves in developed nations further softened the impact.
Warren Patterson, head of commodities strategy at ING, stated that by the end of July, the market could reach an inflexion point if energy flows from the Persian Gulf do not improve. ING's base case projects Brent crude averaging $110 a barrel from July to September, with potential spikes to $120–$130 if the strait remains closed. The U.S. Strategic Petroleum Reserve releases are scheduled to end by late July, coinciding with peak summer demand. As these emergency measures expire, the market faces tightening conditions.
Patterson noted that stronger U.S. exports are coming from inventory, not increased output, raising the risk of government intervention if domestic supply tightens further. He also suggested that without a diplomatic resolution, energy-starved buyers might eventually pay Iran for safe passage through the Strait of Hormuz. China's return to the import market—inevitable as stockpiles deplete—will further strain supply. The combination of depleted buffers, persistent supply constraints, and rising demand suggests a volatile summer for global oil markets.
The same nations relying on dwindling stockpiles to cap oil prices are now exposed to the very shortages they tried to delay. With China drawing down reserves, U.S. exports fueled by inventory draws, and emergency releases ending in July, the cushion against price shocks is vanishing. Brent crude could hit $130 this summer, forcing governments into difficult choices they postponed. The longer the standoff continues, the less control they have over the outcome.
Editorial note: AI-assisted opinion, not established fact. Full disclaimer →
