The recent surge in oil prices, surpassing $90 per barrel, is attributed to a complex interplay of factors beyond the immediate geopolitical tensions between Israel and Iran. Central to the price increase is a global supply shortage, exacerbated by Mexico’s reduction in oil exports, sanctions limiting Russia’s maritime oil exports, potential renewed sanctions on Venezuela, and disruptions from attacks on oil tankers by the Houthi rebels in Yemen. Additionally, the United States is experiencing increased domestic demand for oil from refiners, partly due to these international supply challenges. Despite market volatility, OPEC and its allies continue to enforce production cuts, further straining the supply and elevating concerns over inflation driven by rising commodity prices. With the U.S. summer driving season approaching, these supply pressures could push Brent crude prices towards $100 per barrel for the first time in nearly two years, reigniting inflation fears and complicating the Federal Reserve’s interest rate decisions as well as President Biden’s re-election prospects. Industry experts highlight the significant role of supply constraints in driving up oil prices, noting the robust global demand against a backdrop of weakened supply from several regions. The decision by Mexico to cut exports of its heavy, sulfur-rich “sour” crude oil — a move aimed at reducing reliance on expensive fuel imports — has particularly disrupted global oil markets, affecting prices for U.S. benchmark oils like the Mars Blend and West Texas Intermediate (WTI).
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