More oil is flowing from the Middle East than at any point since the start of the war with Iran, yet crude still costs almost $100 a barrel, much more than at other times when supplies were more constrained.
That seeming conundrum can partly be explained by a change in traders’ views about how long the conflict is going to last. Optimism that an enduring peace deal might be around the corner has given way to concern that hostilities could restart.
In the meantime, the United States and other countries have been drawing down their oil stockpiles to bridge the gap between supply and demand. That is effectively keeping prices high because the world’s buffers against future oil disruptions have become a lot smaller.
Another important factor is that China, which slashed imports soon after the war started, is now buying more oil.
“You have this apparent contradiction,” said David Fyfe, chief economist for Argus Media, a commodities pricing firm. “Flows seem to have picked up. But it’s because the industry has said, ‘What the hell, let’s go for it,’ while the politicians have failed to reach any sort of an agreement.”
There are many different prices for oil, depending on where it’s coming from and when it’s to be delivered. The most commonly cited international price for oil, known as Brent, was $98 a barrel on Wednesday, reflecting how valuable traders think oil will be in December. That is more than the so-called futures price was, on average, in June, July or August, when a lot less crude was flowing out of the Persian Gulf.
