Oil prices could skyrocket in a matter of weeks as reserves run out

The global oil crisis caused by the blockade of the Strait of Hormuz could escalate significantly in just a few weeks, as the current relative calm in the markets is deceptive and temporary. The world has already lost about two billion barrels of oil, which accounts for roughly five percent of annual global supply, and the daily shortfall is growing by another 14 million barrels. 

This is reported by The Economist. 

Currently, Brent crude oil futures are trading at $105 per barrel, which is below the April peak of around $120 and below the record $129 reached after Russia’s full-scale invasion of Ukraine in 2022. Two factors are providing temporary stability. The first is the United States, whose net exports of oil and petroleum products have reached nine billion barrels per day thanks to corporate flexibility and the sale of strategic reserves since March. The second factor is China, which is buying 4.5 million fewer barrels of oil per day due to high fuel prices, weak demand, and the use of domestic reserves.

The current lull threatens to turn into a storm, as oil stocks are rapidly shrinking and could drop to record lows by June, while the buffer of oil on tankers has practically been exhausted. The situation is particularly critical for diesel, gasoline, and jet fuel due to blocked exports from the Persian Gulf and reduced refining in other regions. An additional risk is Donald Trump’s potential decision to ban U.S. oil exports if gasoline prices in the U.S. rise above $5 per gallon—a measure being discussed at the White House that could instantly collapse the global supply system and trigger a sharp spike in prices.

Oil prices rose amid anticipation of a meeting between Donald Trump and Xi Jinping. Traders are focusing on potential signals regarding a resolution to the conflict with Iran, which has impacted global oil supplies.

As a reminder, Trump arrivedin China for the first time in nearly a decade.