Saudi Arabia and UAE sharply increase crude shipments
U.S.-Iran nuclear talks continue, but risk of conflict remains
As concerns grow over potential U.S. airstrikes on Iran, major oil-producing countries in the Middle East are increasing their oil exports in preparation for possible war. While the short-term increase in supply has momentarily slowed the upward trend in international oil prices, extreme price volatility is expected depending on the outcome of nuclear negotiations between the United States and Iran.
According to Bloomberg News on the 26th (local time), Saudi Arabia’s average daily oil shipments so far this month have reached about 7.3 million barrels, the highest level since April 2023. During the same period, the United Arab Emirates (UAE) also posted its highest-ever average daily oil shipments, reaching 3.5 million barrels.
Iran has also increased its oil shipments. According to Kpler, a commodity analytics company, between the 15th and 20th of this month, Iran shipped 20.1 million barrels of oil, roughly three times the volume shipped during the same period last month.
As military conflict between the United States and Iran could lead to blockades of maritime logistics hubs such as the Strait of Hormuz, oil is being stockpiled in anticipation of possible disruptions to exports. Iran has warned that it would blockade the Strait of Hormuz if U.S. airstrikes commence. The Strait of Hormuz, which connects the Persian Gulf and the Arabian Sea, is a passageway for about 25% of the world’s daily seaborne oil trade. Bloomberg News reported, “Even before the United States struck Iranian nuclear facilities in June last year, Iran had already expanded its production.”
As oil-producing countries simultaneously ramped up their exports, the upward momentum in oil prices has slowed. On this day at the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude closed at $65.21 per barrel, down 0.32% from the previous session. After rising to $66.48 on the 20th, the upward trend has reversed. Brent crude from the North Sea closed at $70.84 per barrel, up 0.21% from the previous day, but has hovered around the $70 level since reaching $71.66 on the 19th.
Going forward, international oil price volatility is expected to be extremely high depending on the outcome of the nuclear negotiations between the United States and Iran. On this day, the two sides held their third round of nuclear talks in Geneva, Switzerland, but failed to achieve any significant results. However, they agreed to continue with a fourth round of talks next week in Vienna, Austria, where the headquarters of the International Atomic Energy Agency (IAEA) is located.
OilPrice.com, a specialist oil market media outlet, stated, “If the nuclear negotiations ultimately collapse and the United States proceeds with short-term airstrikes on Iran, the shock to the market could be mitigated more than expected by countries’ oil stockpiles. However, if the conflict drags on and Iran attacks oil facilities in neighboring countries, causing actual supply disruptions, it could lead to much greater turmoil in the market.”
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