According to ING analysts Warren Patterson and Ewa Manthey, oil markets are currently trading on expectations of resumed Persian Gulf flows, a sentiment they describe as overly optimistic due to stalled US-Iran negotiations and ongoing regional tensions, including Hezbollah's rejection of a Lebanon-Israel ceasefire [1]. The analysts emphasize that sizeable oil inventories, which previously acted as a buffer, are rapidly shrinking, particularly as the seasonally stronger summer demand period approaches [1].
ING projects that oil demand could increase by more than 3 million barrels per day quarter-on-quarter in the third quarter of 2024, intensifying the pace of inventory declines from July through September [1]. This tightening is expected to leave the market increasingly vulnerable, potentially requiring significantly higher prices to trigger demand destruction, especially through refined product prices rather than crude oil alone [1].
Concrete data from Europe shows that refined product inventories in the ARA region fell by 17,000 tonnes week-on-week to 4.4 million tonnes, with gasoline and jet fuel stocks dropping by 81,000 tonnes and 49,000 tonnes, respectively. Notably, jet fuel inventories are now at their lowest level since 2020 [1]. In Asia, Singapore oil product stocks experienced a substantial weekly decline of 6.14 million barrels, the largest since December 2024, bringing total stocks to their lowest since October 2024 [1].
The analysts caution that, with inventories tightening and demand set to rise, the oil market could face significant upward price pressure in the coming months unless demand destruction occurs, either through higher crude or refined product prices [1].
CONCLUSION
ING analysts warn that rapidly declining oil inventories in Europe and Singapore, combined with rising summer demand, are tightening the market and increasing the risk of higher prices. Without resumed Persian Gulf flows or a breakthrough in US-Iran talks, the market may require significantly higher prices to balance supply and demand. This scenario points to heightened market vulnerability and potential volatility in the months ahead.