- While the global crude oil market faces the largest supply-side shock in history, Brent crude oil prices remain around $100 per barrel, reflecting that the current geopolitical risk premium is still relatively limited.
- The release of strategic petroleum reserves by various countries, along with China's slowing demand and replenishment of implicit inventories, has temporarily offset the impact of a daily supply disruption of 11.1 million barrels of oil due to factors such as Middle Eastern geopolitical conflicts. However, global crude oil inventories have decreased from 3.7 billion barrels in March to 3.45 billion barrels in June.
- The market generally bets that geopolitical tensions will cool down before autumn. Currently, the long-term curve of crude oil futures still prices a drop in oil prices to around $85 per barrel by the end of the year, but the continued depletion of inventory buffers is raising tail risks.
Erosion of Spot Buffers and Premium Calculation
JPMorgan's calculations show that the current Brent crude oil price of $100 per barrel is only $13 higher than the reasonable fundamental valuation of $87 in July, indicating that the geopolitical risk premium is significantly underpriced. Although the absolute scale of the supply gap has reached twice that of the 1973 oil crisis, global strategic inventories and structural adjustments on the demand side have squeezed out some premium space.
Supply Chain Disruptions and Inventory Depletion
According to Kpler data, global crude oil inventories have cumulatively declined by 250 million barrels since March, and shipping blockages in the Mandeb Strait and the Strait of Hormuz have further weakened the flexibility of the spot market. Analysts from Goldman Sachs and Raymond James point out that if Persian Gulf shipping interference continues into autumn, the failure of the spot supply-demand balancing mechanism will lead to a rapid upward revaluation of oil prices to above $120 per barrel.
Policy Games and Electoral Political Considerations
The White House's sensitivity to end-user fuel prices is the core marginal variable constraining the unlimited rise in oil prices. As the U.S. midterm elections in November approach, the impact of high oil prices on voter sentiment will force policymakers to intervene in geopolitical developments through diplomatic or economic means, and traders are dynamically capping the upward space for oil prices based on this.
Revaluation Risk of Forward Curves
The discount structure of forward crude oil options and futures indicates that the financial market still maintains the baseline assumption of oil prices returning to $85 per barrel within the year. However, if the blockage of key channels such as the Mandeb Strait lasts longer than expected, marginal buying will have to dramatically reprice the long-term curve, triggering a cross-asset dimension risk asset rebalancing.
