U.S. Energy Information Administration last week revised its earlier forecasts to reflect a bigger, longer disruption to global oil supplies than previously expected because of the U.S.-Israeli war in Iran. Reuters reported May 12 the forecast highlights “the uncertainty that has roiled broader energy markets since the conflict began three months ago.”
EIA said disruptions to crude oil production in the Middle East have increased significantly since its April outlook. “We assess that Iraq, Saudi Arabia, Kuwait, the UAE, Qatar and Bahrain collectively shut in 10.5 million barrels per day of crude oil production in April,” EIA said in its May outlook. EIA said oil shipments through the Strait of Hormuz will not likely reach pre-conflict levels until later this year, and “we expect some oil production in the Middle East to remain disrupted over that period. Disrupted production leads to large oil inventory draws, particularly in May and June.”
Brent crude oil spot price increased significantly last month to reach a high of $138 per barrel April 7. It averaged $117 per barrel for the month. EIA expects global oil inventories to fall by 8.5 million b/d in second quarter to keep Brent prices around $106 per barrel in May and June.
Hart Energy reported May 18 that “higher-for-longer oil prices could spur more drilling and M&A (mergers and acquisitions).”