Key Takeaways:
Global oil stockpiles are approaching dangerously low levels as ongoing supply disruptions block millions of barrels per day from reaching end markets, raising the risk of a price surge to $135 a barrel, according to energy markets veteran Dan Dicker.
"Markets are underestimating the impact of these supply disruptions," Dicker, author of "Oil's Endless Bid," said on Bloomberg This Weekend with David Gura and Christina Ruffini. "If inventories continue to fall, crude prices could surge from current levels to as high as $135 a barrel."
The warning comes as the US Strategic Petroleum Reserve has fallen to about 350 million bbl, nearing levels not seen since the early 1980s when the government was still filling the reserve established in 1975. The Department of Energy is releasing crude at a rate of 9 million bbl/week, with the current drawdown expected to continue through July, according to Oil & Gas Journal. Nearly 70 million bbl have been released from the SPR so far.
The supply crunch stems from the Iran war-related closure of the Strait of Hormuz, a chokepoint through which about 20% of the world's oil passes. Critical storage hubs have hit decades-low levels, and energy analysts warn that crude prices are likely to remain above pre-war levels for months after the strait reopens, stretching the timeline for any refill of emergency reserves.
The drawdown has broader implications beyond crude markets. Sustained oil prices above $130 a barrel would feed into inflation expectations, potentially complicating central bank policy decisions across developed economies. The last time Brent crude traded near $135 was in 2008, when prices hit an all-time high of $147 a barrel during the global financial crisis, triggering a sharp demand contraction.
The Trump administration is in discussions to establish a petroleum reserve in California to reduce reliance on foreign oil, though no timeline has been announced. Industry leaders have warned that the low reserve levels could exacerbate market shocks during future supply disruptions, especially if geopolitical tensions in the Middle East escalate further.
This article is for informational purposes only and does not constitute investment advice.
