Oil Prices Rise as Flows Through Hormuz Increase

Let's get more insight on these oil markets. Oil strategist Julian Lee joins us now. Julian, what what is sort of the mix here of concern of renewed tension in the Strait Of Hormuz versus what we've been hearing from analysts that, in fact, you are seeing the flow of oil, of energy start to return to prewar levels? Yeah. I I think this is this is the real dilemma that's pulling markets both up and down at the moment. We get some very bullish comments in terms of flows, out of the US central command, out of the US administration, out of some of the analysts saying that, flows are almost back to normal, you know, more than 10,000,000 barrels, of oil exiting Hormuz in a twenty four hour period, and that sends prices downwards. And then in response to that, to some extent, we get this surge in Iranian attacks on tankers. That starts to worry the market, and that sends prices back up again. And I think we are going to continue to see this, that the market is going to be very much pulled up and down by, the ebb and flow of tensions and attacks in the Strait Of Hormuz, potentially in the Southern Red Sea as well. Something that the Deutsche Bank strategist pointed out, Julian, was this idea that the oil futures curve is is still implying some normalization in oil prices, despite that being wrong. I wonder to what degree further out in this market in the curve that there is pricing that suggests that a breakthrough will happen. Yeah. I mean, I think if if you look at the prices and you look at price forecasts, I mean, the The US, Department of Energy updated its short term outlook, published that yesterday, I think it was, and they have prices easing significantly next year. They talk about moves towards a normalization of the situation. I think they've got Brent averaging something like $85 a barrel next year. So, you know, still up from where it was before the attacks on Iran in February, but but significantly below where it's been recently. But we've seen this consistently that everyone has expected that the situation will normalize in the coming quarter, and that's got pushed back and pushed back as the situation hasn't normalized. And I think there is a real possibility that, this will drag on further, with neither side willing to make the concessions that the other requires to find a a long term solution to this problem. What difference does it make, short term or or otherwise, Julian, to have what we heard from the Europeans of of releasing more stock of of diesel and and oil? Well, I I mean, in the short term, this is this is a very good thing for consumers. I mean, obviously, more oil onto the market assuming it actually translates into physical barrels of supply materializing at the pumps that ought to bring prices down. But the problem with it is is that this is only a temporary solution. The the stocks are finite. The the... They're not a they're not a a a flow of oil into the system that continues over time. There's... Once you've released these stocks, they no longer exist to be released in the future if if we have, you know, continued tightness in five or six months time, for example. So it can only ever be a short term solution unless those stocks are replenished. The other problem, of course, is that as prices come down, that sends a signal to the market that supply is ample. That tends to push up consumption, which can actually, you know, over the course of time, make the situation worse.