Torsten Slok, chief economist at Apollo Global Management, stated on the 22nd (local time) that the risk of energy market supply disruptions has increased again due to the re-escalation of the Middle East conflict. Slok explained that oil transit volume through the Strait of Hormuz has dropped to near-zero levels, warning of potential 'nonlinear cascading damage' where supply disruptions could lead to massive price spikes and economic shocks. International oil prices surged recently as US-Iran peace negotiation expectations weakened and Middle East hostilities resumed, with Brent crude hitting $94.25 per barrel intraday and West Texas Intermediate (WTI) futures exceeding $88.
Brent Crude Hits $94.25 per Barrel Amid Geopolitical Tensions
Brent crude reached $94.25 per barrel during intraday trading on the 22nd (local time), while WTI futures exceeded $88. Geopolitical tensions escalated after US President Donald Trump warned of retaliation for US military deaths and announced plans to strike Iranian nuclear facilities. US Secretary of State Marco Rubio stated that Iran is not negotiating seriously, further heightening tensions.
US Strategic Petroleum Reserve Falls to 3.1 Million Barrels
Slok expressed concern over the significant decline in US strategic petroleum reserves. Citing data from the US Energy Information Administration, he explained that strategic petroleum reserves decreased to 3.1 million barrels last week, marking the lowest level since 1983.
Refining Margin Expansion Signals Supply Shortage Risk
Slok analyzed that expanding refining margins also signal supply shortages. Refining margins represent the difference between crude oil prices and petroleum product prices such as gasoline and diesel. As margins expand, refineries' production incentives increase, and the possibility of supply shortages rises. Slok warned, 'The real tail risk is the moment when inventories at critical facilities such as airports or power plants suddenly run out.'
FAQ
What caused oil prices to surge on the 22nd (local time)?
Oil prices surged on the 22nd (local time) due to renewed US-Iran military tensions and the resumption of Middle East hostilities. Brent crude hit $94.25 per barrel intraday, and WTI futures exceeded $88. President Trump warned of retaliation for US military deaths and announced plans to strike Iranian nuclear facilities, while Secretary of State Rubio stated Iran is not negotiating seriously.
Why is the decline in US strategic petroleum reserves significant?
The US strategic petroleum reserve fell to 3.1 million barrels last week, the lowest level since 1983 according to US Energy Information Administration data. This significant decline reduces the US government's ability to respond to supply disruptions and price spikes in the energy market, increasing vulnerability to oil supply shocks.
What does the drop in Hormuz Strait oil transit indicate?
According to Apollo Global Management chief economist Torsten Slok, oil transit volume through the Strait of Hormuz has dropped to near-zero levels. This indicates a major supply disruption risk in the energy market, as the Strait of Hormuz is a critical global oil transit route. Slok warned this could trigger 'nonlinear cascading damage' leading to massive price spikes and economic shocks.
