Oil falls 7% on peace hopes: the supply gap won’t close that fast
“The underlying supply shortfall of 10–11 million barrels per day of crude oil does not go away immediately and will see markets still drawing inventories until Middle Eastern crude production is back online, which is months away.”
June Goh, Senior Oil Analyst at Sparta Commodities
Oil fell nearly 7% on peace deal optimism — but even a signed agreement leaves the 10–11mb/d supply shortfall intact until damaged infrastructure is repaired, a process analysts say will take months
Physical flows through the Strait of Hormuz remain restricted: only three LNG tankers and one Iraqi crude supertanker have transited in recent days, well below any level that signals a meaningful resumption
Inventory drawdowns will outlast any diplomatic headline — markets should expect continued pressure on Brent as OECD stocks absorb the ongoing shortfall while Middle Eastern production works its way back online
In a Reuters report on the oil price selloff, Sparta’s Senior Oil Analyst June Goh cuts through the diplomatic noise: a peace deal does not flip a switch on supply.
With 10–11mb/d still offline and oil infrastructure damage yet to be repaired, the path to normalised flows is measured in months, not days. Brent dropped nearly 7% on Monday as traders priced in the possibility of a US–Iran memorandum of understanding — but Goh’s point holds: physical reality, not political announcements, determines the timeline.
Until Middle Eastern production is genuinely back online, inventory drawdowns continue and the supply gap deepens. Watch the physical flows, not the headlines.
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