Oil prices have rebounded in recent days, due largely to escalating tensions in the Middle East. Despite a previously signed memorandum of understanding between the US and Iran, hostilities intensified, including military strikes, attacks on shipping in the Strait of Hormuz, and threats by Houthi rebels to impose a naval blockade on Saudi Arabia. These developments increased concerns about disruptions to global oil supplies, pushing Brent crude above USD 90 per barrel and WTI above USD 84 per barrel. Major banks have responded by raising their oil price forecasts, with Goldman Sachs suggesting prices could reach USD 120 per barrel by year-end.
Drone strikes temporarily halted exports at CPC's Black Sea Terminal, threatening one of the world's most important crude export routes for Kazakhstan and Russia. While operations have historically resumed quickly after such incidents, repeated disruptions add further pressure to an already constrained global supply environment.
Regarding demand, analysts are becoming increasingly concerned about the economic effects of a developing El Niño event expected to extend into 2027. The phenomenon could raise food prices, increase inflation, disrupt supply chains and weaken economic growth, particularly in Asia. Higher inflation may force central banks to maintain tighter monetary policy, potentially constraining oil consumption. Recent assessments suggest that weaker Asian demand has already helped moderate oil price increases earlier in the year.
In downstream markets, Canada's largest refinery, Irving Oil's Saint John facility, plans a maintenance shutdown from September to November. Given the refinery's importance to fuel supplies in northeastern North America, the closure could further tighten product markets and contribute to higher gasoline and diesel prices.