The Strait of Hormuz is proving to be the crude oil price’s crucible for now as the UK, US and Iran look set to become locked in a precarious face-off after Iran went on the offensive in the strait last week. Iran’s Islamic Revolutionary Guard Corps seized aThis saw the price of crude oil regain some of its earlier losses last week. Before the seizure, Brent crude oil had slipped more than 6% to about $55 from $60 earlier in the week.
the black gold’s supply and demand dynamics spread far wider than this, with the crude oil price caught in the cross-currents of macro-economic events in 2019. So-called Opec+, which includes non-members Russia, Kazakhstan, and Mexico, agreed to extend production cuts for another nine months earlier in July, and Opec and non-Opec allies also significantly signed a “Charter of Cooperation”, which formalises the need for non-Opec members to approve production decisions going forward.
The IEA is also expecting demand to slow, citing a warm winter in Japan, a slowdown in the petrochemicals industry in Europe, and weak gasoline and diesel demand in the US. Although there are still concerns about a global economic slowdown, it is somewhat of a shifting target. Key data released last week showed the US economy is in a better state than anticipated. Retail sales rose 0.4% in June, ahead of an expected 0.1% increase, signalling that consumers are in a better state than anticipated.
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