Global commodity trader Vitol has warned that oil markets may be underestimating the risks posed by the ongoing conflict involving Iran, despite recent declines in crude prices.
Speaking at the S&P Global Energy Middle East Petroleum and Gas Conference in London on Tuesday, Vitol’s Bahrain-based Managing Director, Tom Baker, said the effective closure of the Strait of Hormuz and attacks on key energy infrastructure have removed about 14 million barrels per day of Middle Eastern oil supply from the market.
Baker described the disruption as the largest oil supply crisis in history, cautioning that while crude production could eventually resume, shortages of refined petroleum products may persist for the remainder of the year.
He said a critical moment could emerge when buyers require physical oil supplies that are no longer readily available, potentially triggering a sharp rise in prices.
Oil prices briefly surged to as high as $126 per barrel following the escalation of tensions in the Middle East but later eased to around $95 per barrel on Tuesday.
According to Baker, current inventories cannot be relied upon indefinitely, while major consumers such as China will eventually need to restore significant import volumes.
He noted that when demand for physical barrels returns, prices may need to rise further to balance the market.
Baker said the only mechanism capable of restoring equilibrium under such conditions would be demand destruction, where sustained high prices force consumers to reduce consumption.
However, he added that demand destruction is unlikely to occur while oil prices remain closer to $90 per barrel.
His comments highlight growing concerns among industry participants that the market may not yet fully reflect the potential supply risks stemming from the Middle East conflict.