Oil prices have primarily been driven by renewed conflict between Israel and Iran in the past few days. Missile exchanges and strikes across Iran, Israel, and Lebanon briefly pushed Brent and WTI up by around 5 per cent, reflecting fears of disrupted supply and stalled peace talks. However, prices quickly retreated after both sides agreed to a temporary truce, stabilising Brent at between USD 92 and USD 94 per barrel. Despite this calm, analysts warn that low global inventories could still drive prices above USD 100 per barrel in the future. Concerns also persist around key shipping routes: uncertainty over transit through the Strait of Hormuz and potential Houthi restrictions in the Red Sea could further tighten supply.
OPEC+ announced another production increase, this time amounting to 188,000 bpd. However, these targets have limited real impact, because Middle East disruptions have significantly reduced actual output. Production has fallen sharply - from 42.77 Mn bpd in February to 33.19 Mn bpd in April - highlighting the gap between policy and reality.
Demand dynamics are weakening, particularly in China. Imports dropped to about 7.8 Mn bpd in May, their lowest since 2017, while Iranian crude shifted from a premium to a discount versus Brent. Reduced refinery activity and policy flexibility allowing lower processing rates further signal softer consumption.
Finally, downstream developments offer some optimism. Nigeria’s Dangote refinery has increased throughput to 700,000 bpd and plans further expansion, boosting exports and providing additional supply amid global shortages, especially for refined products like jet fuel.