Kpler Analyst Warns Oil Prices Can Soar Above US$100 Per Barrel
By Muhammad Fawwaz Thaqif Nor Afandi
KUALA LUMPUR, July 22 (Bernama) – Market intelligence company Kpler’s senior crude oil analyst Muyu Xu has warned that crude oil prices can climb above US$100 per barrel and even spike to US$120 due to acute supply constraints if the war between the United States and Iran in West Asia persists for another one or two weeks.
Oil prices are currently hovering at above US$93 per barrel.
By then, “the market would likely start to feel a genuine supply tightness” raising fears it could shift the market from a modest oversupply into a supply deficit again," said Muyu Xu, who is with the data and market intelligence company.
As such, the global oil supply chain remains highly vulnerable, she said in response to questions posed by Melissa Ong, the host for Bernama TV during the “Bernama World” programme in a zoom interview from Singapore.
She said that the price outlook will depend on how the conflict evolves and to what extent traffic through the Strait of Hormuz is affected and whether Houthi forces follow through on threats to target Saudi Arabia-linked vessels and threats of a Red Sea naval blockade.
“If the heightened tension persists for another week or two, the market would likely start to feel a genuine supply tightness.
“And in that scenario, oil prices could easily move above US$100 per barrel and a spike to about US$120 or even higher cannot be ruled out," she said.
Oil prices have hit a five-week high with Brent crude oil rising 2.68 per cent to US$93.45 per barrel while West Texas Intermediate (WTI) crude rose 2.69 per cent to US$86.61 per barrel.
Xu said the oil market remains on edge, with daily transits through the Bab al-Mandab Strait falling to fewer than 10 vessels in recent days from around 50 before the latest military strikes.
The strait is a maritime chokepoint that connects the Red Sea to the Gulf of Aden near the southwestern coast of Yemen.
With the Strait of Hormuz blocked, it functions as the vital second choke point for seaborne oil and global trade.
According to news reports, Yemen's Houthi group declared an immediate maritime blockade on Saudi Arabia, banning Saudi-linked maritime navigation and warning that any escalation by the kingdom would be met with what it described as a "comprehensive and severe escalation".
The announcement came after the group accused Saudi Arabia of carrying out an airstrike on Sanaa airport last week and launched missiles towards Saudi territory, ending years of relative calm.
Xu said that based on media reports, at least four crude tankers had reversed course while heading to load Saudi crude or after leaving Saudi ports, suggesting market participants are taking Houthi threats of a maritime blockade seriously.
She said the market nevertheless remains in a wait-and-see mode amid hopes that diplomatic efforts could help ease the conflict.
"Market participants are becoming increasingly concerned that a prolonged period of subdued oil flows from West Asia could shift the market from a modest oversupply into a supply deficit again,” she said.
Touching on global oil supply, Xu said crude flows through the Bab al-Mandab Strait fell to around three million barrels per day (bpd) last week and have been close to zero so far this week, compared with more than eight million bpd in early July.
Producers in West Asia have sought to maximise alternative export routes, with Saudi Arabia maintaining crude loadings of around four million bpd from its Red Sea port of Yanbu, although it remains uncertain whether those exports will be disrupted, she said.
Xu added that producers west of the Suez Canal, including those in the Americas and West Africa, have maintained high production and export levels to capitalise on stronger oil prices, but warned that fresh drone attacks on Russian export infrastructure and the approaching US hurricane season could also constrain supplies.
"As a result, the global oil supply chain remains highly vulnerable. Alternative export routes from West Asia and additional west of Suez supply should be viewed as a temporary mitigant rather than a permanent solution," she said.
She said while those measures have helped cushion the immediate supply shock, they are unlikely to be sufficient to keep the global oil market balanced if disruptions to oil flows from West Asia continue for an extended period.
-- BERNAMA