The fracking towers stand near access roads to a refinery and petrochemical complex, operated by Abu Dhabi National Oil Co. (ADNOC), Al Ruwais, United Arab Emirates.
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Oil markets are nearing lows in Asia, with Europe likely to follow and the US likely to face shortages in July, Jeff Currie, Carlyle’s chief energy pathways strategist, said Monday, emphasizing the global energy shock due to the Iran war.
Global inventory figures can be misleading, Currie warned, as most of the oil stored around the world cannot be used immediately.
A large portion of that oil is needed to keep pipelines and storage systems running safely, leaving only a small portion available on the market. Asia is already close to these so-called “low levels of performance,” Currie told CNBC on the sidelines of the UBS Wealth Conference in Singapore.
Global oil markets have been under pressure since the outbreak of war with Iran earlier this year, after disruptions to shipping through the Strait of Hormuz severely reduced energy exports from the Middle East.
Next will be Europe. We expect Europe to start experiencing problems at some point … after this bank holiday.
Jeff Currie
Carlyle, chief strategy officer of energy pathways
“We’ve seen prices explode in products. Jet fuel has gone down, but diesel has now risen above jet fuel. So, the problem is still going on here in Singapore. It’s just gone from jet to diesel,” said Currie.
Europe may begin to see similar trends in a few weeks, as the current easing of US oil flows may be temporary, and as the summer driving season begins. “I would say, Asia, you’re there. Europe, give it about another month, and look at July is a problem in the US,” said Currie.
“All stocks from the United States are from the US SPR [Strategic Petroleum Reserve] they are sent to Europe, so the Europeans think they have no problem because they get all this oil bought from the United States, but that will not continue.
His comments come after recent warnings by the International Energy Agency that the global oil market could face supply cuts during peak summer consumption, especially if exports to the Middle East fail to recover and inventories continue to fall.
“It is possible that we will enter the red zone in July or August if we do not see any improvement in this situation,” warned IEA chief Fatih Birol last week.
Carlyle’s Currie has dismissed proposals such as suspending the US federal fuel tax as insufficient to deal with supply shortages.
“That doesn’t solve any problems. The only way you solve this problem is to increase the availability of molecules,” he said, referring to the physical supply of fat. While the release of the US SPR provided some relief, Currie said market prices suggested the underlying deficit remained negative.
Oil prices since the beginning of the year
Ultimately, reopening the Strait of Hormuz remains the only permanent solution, though that may take some time to normalize markets, Currie said, arguing that dwindling global supplies also strengthen Iran’s leverage in ongoing negotiations.
US President Donald Trump on Sunday asked his delegation not to agree to a deal with Iran to urgently end the war and reopen the Strait of Hormuz.
“Every day that passes, Iran’s leverage leverage compounds of Iran. Why? Because oil inventories and inventories continue to decrease,” he said. “The moment you think you’ve won, that’s when you know you’ve probably lost, and their negotiating position right now has never been stronger in the last 47 years.”
