Iran’s war has shut the Strait of Hormuz, but oil is still trading around $110 a barrel instead of the $150-plus many analysts expected. Gas is sitting at $4.39 a gallon, high enough to sting drivers, but far below the levels that followed Russia’s invasion of Ukraine.
That gap has left oil traders scrambling for an explanation. U.S. production and output from Latin America and other regions have helped some, and a huge amount of crude was already parked in tanks and on ships before the war. JPMorgan said that buffer, plus reserve releases and de-sanctioned oil, is plugging only part of the hole.
Inventories are fading
The cushion is shrinking fast. U.S. crude inventories unexpectedly fell by 6.2 million barrels last week, while gasoline and distillate stockpiles also dropped. The extra supply that kept prices from spiking looks temporary, and the article says those buffers only have a few months left before they break.
- Oil is around $110, not the $150 level analysts had expected at the start of the war.
- U.S. crude inventories fell 6.2 million barrels last week, according to the Energy Information Administration.
- Gas is at $4.39, while crude oil has climbed 20% in less than two weeks.
The market bet. Some of the holdback is coming from speculative traders who are betting President Donald Trump will get out of Iran quickly, which has kept a lid on futures even as the Strait remains closed.
For now, the question is how long the remaining stockpiles can absorb a 14 million-barrel supply shock. The next stretch of summer refinery demand will tell.
