Uche Cecil Izuora
Tightening global oil inventories and continued geopolitical tension are expected to keep crude prices supported through August, even as the Organization of Petroleum Exporting Countries and allies (OPEC+) moves to restore additional production, according to Tamas Varga, analyst at PVM Oil Associates, part of TP ICAP.
Varga said the oil market remains dominated by geopolitical risks stemming from conflicts in the Middle East and Ukraine, while trade disputes and inflation continue to cloud the broader economic outlook.
“OPEC+ has now fully reversed its voluntary production cuts, but a meaningful recovery in regional oil flows remains elusive,” Varga said, noting that the group’s decision to raise output by another 188,000 bpd beginning in September has done little to ease concerns over global supply.
He pointed to continued disruptions affecting crude and refined product markets, including attacks on energy infrastructure, constrained exports from Kazakhstan and ongoing shipping risks in the Persian Gulf, Red Sea and Suez Canal.
According to Varga, inventories remain well below historical norms despite modest recent improvements. U.S. distillate inventories have recovered from May lows but remain significantly below year-ago levels and the five-year seasonal average. Similar inventory deficits persist in Northwest Europe and Singapore, particularly for middle distillates such as gasoil.
“The latest snapshot hardly paints a picture of an abundance of black gold,” Varga said.
The analyst also said recent shifts in U.S. policy toward Iran continue to inject uncertainty into the market. While Washington has postponed additional military action following diplomatic discussions with Gulf allies, prospects for a broader agreement remain uncertain.
Looking ahead, Varga said crude prices are likely to remain firm through August unless Middle East oil flows recover sustainably or demand begins to weaken.
“Given the persistent depletion of global oil inventories, we would expect firmer prices during August,” he said.