Post-ceasefire hangover: The world is awash in crude oil right now
After the war, the hangover. While hysteria about the closure of the Strait of Hormuz gripped the oil market for the last few days, the reality could not be more different: a wave of Gulf crude oil was forming. Now, the swell is heading into a global oil market that's already oversupplied—hence Brent crude was trading below $70 a barrel on Tuesday [after US President Donald Trump announced a surprise ceasefire between Israel and Iran].
The Northern hemisphere summer, which provides a seasonal lift to demand, is the last obstacle before the glut becomes plainly obvious. Oil prices are heading down—quite a lot.
If anything, the Israel-Iran '12-Day War' has worsened the supply-versus-demand imbalance even further—not just for the rest of 2025, but perhaps into 2026 too.
Also Read: Javier Blas: An Israel-Iran war may not rattle the oil market
On the demand side, geopolitical chaos is bad for business—let alone tourism. Petroleum consumption growth, already quite anaemic, is set to slow further, particularly in West Asia. But the biggest change comes from the supply side: The market finds itself swimming in oil.
Ironically, one of the big producers pumping more than a month ago is Iran. Hard data is difficult to come by, as Iran does its best to obfuscate its petroleum exports. Still, available satellite photos and other shipping data suggests that Iranian production will reach a fresh seven-year high above 3.5 million barrels a day this month, slightly up from May.
That bears repeating: Iranian oil production is up, not down, despite nearly two weeks of heavy Israeli and American bombing.
Reading between the lines, Trump has made two things clear: One, he doesn't want oil prices above $70 a barrel; and two, he still thinks Washington and Tehran can sit down to talk. So it's very unlikely that the White House will tighten oil sanctions on Iran, an issue where Trump is very similar to former President Joe Biden: Lots of talk, very little action.
Also Read: Mint Quick Edit | West Asia's ceasefire: The oil market got lucky
Across the Gulf, Saudi Arabia, Kuwait, Iraq and the United Arab Emirates are all pumping more than a month ago. True, a large chunk of the increase was expected after the Opec+ oil cartel agreed to hike production quotas. Still, early shipping data suggests that exports are rising a touch more than expected, particularly from Saudi Arabia, which leads Opec+.
Petro-Logistics, an oil tanker-tracking firm used by many commodity trading houses and hedge funds, estimates that Saudi Arabia will supply the market with 9.6 million barrels a day of crude in June, its highest level in two years. The firm measures the flow of barrels into the market, offsetting stockpiling moves, rather than well-head output (the latter is Opec's preferred measure).
'Looking at the first half of the month, there has been a large rush of oil flowing out of the Persian Gulf region," Daniel Gerber, the head of Petro-Logistics, tells me. Data covering the first couple of weeks of June shows strong exports from Iraq and the United Arab Emirates, two countries that typically cheat on their Opec+ production quotas [designed to keep prices up].
The risk here is more, not less.
And then there's US shale output. In May, the American oil industry was on the ropes, with crude approaching $55 a barrel. At those prices, US oil production was set to start a gentle decline in the second half of the year and fall further in 2026.
The recent conflict that drove crude to a peak of $78.40 a barrel handed US shale producers an unexpected opportunity to lock in forward prices, helping them to keep drilling higher than otherwise. Anecdotally, I hear from Wall Street oil bankers that their trading desks saw some of the largest shale hedging in years.
Also Read: Counter-intuitive: Why Opec wants lower oil prices
With shale oil, small price shifts matter a lot: The difference between booming production and declining output is measured in a fistful of dollars, perhaps as little as $10 to $20 a barrel. At $50, many companies would be staring at financial calamity and production would be in free-fall; $55 is survivable; $60 isn't great, but money still flows and output holds; at $65, everyone is back to more drilling; and at $70 and above, the industry is printing money and output is soaring.
In the oil market, history is a very good guide. Look at what happened after the first Gulf War in 1990-1991, or the second one in 2003. Amid the carnage, oil kept flowing—often in greater quantities. When those conflicts ended, these flows increased further.
The Iran-Israel conflict isn't quite over yet. The ceasefire is, at best, tentative. And other supply disruptions may change the outlook. But, right now the world has more oil than it needs. ©Bloomberg
The author is a Bloomberg Opinion columnist covering energy and commodities.
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First Post
17 minutes ago
- First Post
Lessons Israel-Iran war has for India's Operation Sindoor
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Reports indicate that the majority were killed by explosive-laden drones, indicating a very high level of internal penetration into Iran. Israel has always had a formidable intelligence capability. But this was something else, and it's an open question what kind of deep assets it used when the 'go' command was given. For depend upon this. Such assets are not built overnight. That is worrying in terms of future wars. That means India has to not just up its technical intelligence for the future but also use technology to guard against such locally launched attacks – which could be on intel agencies, on high officials, and on personnel of sensitive installations. So far, the thrust of defence expenditure has been in securing the country's borders. Time to look inwards. Sindoor as Template The second aspect is rather the reverse. In many ways, the US operation, 'Midnight Hammer', was a textbook copy of 'Operation Sindoor'. Trump's announcement of having targeted 'only' nuclear sites, clear signs of talking to Iranians, and most of all, a series of moves to end the war quickly, something that the US is not known for. Those moves included allowing China to continue to buy oil – though sanctions remain – thus ensuring that outside powers did not take a hand. Iran was mollified by leaving open the possibility of sanctions relief. Then was his weighing heavily on Israeli Prime Minister Netanyahu, to end his continuing strikes. Since the US could at any time stop its missile interception assistance for Israel, this arm-twisting was likely to have had a telling effect. The Standoff War Another takeaway from both operations is the 'stand-off' wars. Prior to US entry into Iran, Washington made sure that Israel had managed complete air superiority with bombing and missile raids. Even then it used a formidable array of aircraft that included the famed Stealth B-2's, practically invisible to radar, and fighter aircraft from its many bases in West Asia. And to make trebly sure, some 'two dozen' land-attack cruise missiles were fired from a submarine which was entirely undetected, at Isfahan. All attacks were at the extreme west of Iran, indicating that aircraft had no intention of doing a flyby and 'loitering' in the war zone. The blueprint of overwhelming force is used since even one aircraft lost would have been the political end for President Trump. No cities were hit, and US intel would have known full well that the major sites had been evacuated. But the lesson is that when there are no serious casualties, escalation is unlikely. This was also the case in Sindoor, where casualties were few. India did not have such a luxury of a package of aircraft (not to mention bases from where fighters could take off and provide protective cover), nor did it even enter Pakistan. But both provide a lesson in 'stand-off' wars. That means a line of technology development that includes, vitally, the ability of continuous satellite monitoring. India's own space programmes need to take note, and quickly. STORY CONTINUES BELOW THIS AD Control of the Narrative Another issue to assess is control of the narrative. Even today, the imagery that is being discussed all over the internet is that of Iran. The damages to Israel were kept under wraps, with even the last missile strike by Iran, which mowed down three buildings at Beersheba, with casualties estimated at 4, which seems incredible given the clearly apparent destruction. But Israelis have long been used to violence and have safe rooms, standard procedures for quick evacuation and bunkers. 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But India has to, in turn, learn from Israel the contours of future war, where the enemy could be already well within the gates, wreaking havoc when it is given the signal. In this, both Pakistan and China are better placed than India. Time to reverse that, either with human assets – which are difficult for obvious reasons – and with technology. Future iterations of Operation Sindoor need to keep this clearly in the forefront. STORY CONTINUES BELOW THIS AD The author is Director (R&A) at the Centre for Land Warfare Studies. She tweets @kartha_tara. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost's views.
Hindustan Times
18 minutes ago
- Hindustan Times
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Time of India
18 minutes ago
- Time of India
Iranians CHANT ‘Death To US & Israel' At Funeral For Commanders, Nuclear Scientists Killed In War
Iranians chanted 'Death To America' and 'Death To Israel' at 'historic' state funeral for military commanders and nuclear scientists. Social media footage showed Iranians donning black clothes, marching through streets of Tehran behind coffins of around 60 people with Iranian flags. Coffins draped in the Iranian flag, bearing portraits of deceased commanders, were flanked by crowds near Tehran's Enghelab Square. Watch for more details.
