Oil prices are roaring back as it seems the Biden administration is having second thoughts about quickly lifting sanctions on Iran, expecting huge demand on the global reopening trade.
The oil market was up and then down because of off-again, on-again Iranian and Russian sanctions. Oil prices, which were partly weak due to the crypto craze, had a meltdown yesterday.
Oil prices sold off hard after a Russian diplomat claimed there was a significant breakthrough in world power and Iranian nuclear talks, and that a major announcement was going to happen today. Later on, the envoy said that he was confused or taken out of context.
Gasoline shortages are slowly starting to ease and we’re seeing panic subside as the Colonial Pipeline is getting back to full speed. While many stations are still dry, the surge of people with full gas tanks is reducing demand.
The hack attack on the Colonial Pipeline is entering day 5 and is already causing some spot shortages of gasoline on the East Coast, as they’re losing 1.25 million barrels of gasoline per day. Airports are also reporting shortages of jet fuel which could impact flight schedules.
While the cyberattack may have a short-term impact on the price of crude oil and gasoline, assuming they can bring the pipeline back online quickly, we can't ignore the fact that this attack, along with others like it, is a major national security threat.
The reopening trade in the U.S. and around the globe has Brent Crude within a hair of $70.00 per barrel as the supply side for oil will start to get tighter. U.S. refinery capacity is lower, as well.
Supply chain issues are creeping into sectors across the commodity space, as a scarcity of supply suggests that the supercycle call that we’ve long anticipated is finally here.
Demand fears are still holding back the crude oil market, along with the prospect of a deal to get Iranian oil back on the market. Drone attacks on Saudi oil fields suggest that Iran is still not worthy of having sanctions lifted.
OPEC+ has skipped all the drama and decided to follow through on a gradual increase in production because, despite the hit from another wave of Covid-19 in India, the reopening trade is getting harder for oil traders and OPEC+ to ignore.