The price of oil soared today to $115 a barrel amid Middle East tensions. This prompted an urgent meeting between the G7 Finance Ministers. Ministers also discussed the possibility of releasing 300 millions barrels through the International Energy Agency.
The speculation about this move has already helped to temper the price rise. However, prices are still far higher than they were before the conflict.
Why oil prices remain high
As many countries have reported slower production, millions of barrels of crude oil remain closed in the Gulf . Many have declared force majore which allows them to stop supplying oil if events occur beyond their control.
Even though a release of 300 million barrels is massive, it covers only three days’ worth of oil consumption. Continued Strait of Hormuz disruptions, and the security threats from missiles and drones are continuing to exert pressure on market.
The G7 move: Limitations
G7’s intervention may slow down the rise in prices, but cannot resolve all problems. Major Asian consumers, including China, India, and South Korea, drive strong demand.
These products are not the only ones affected. Jet Fuels, and Fertilizer Precursors are among them.
Market Outlook
The emergency release may temper the rise to 150 per barrel but the fundamental supply disruptions, coupled with persistent demand makes it unlikely the prices will stabilise completely. Analysts predict continued volatility on the energy markets.
