Oil Daily | Tensions Ease as Israel-Iran Conflict Causes 4% Drop in Oil Prices Amid Stable Supply

【Global Oil Supply and Demand】

U.S. oil production is projected to decline slightly due to weaker prices impacting investment and production, particularly in the shale industry. Analysts suggest that shale output may plateau or decrease if WTI oil prices remain low. The U.S. Energy Information Administration forecasts a minor decrease in crude production by 2026.

The conflict between Israel and Iran is causing volatility in the oil market. While prices have spiked due to geopolitical tensions, actual oil supply disruptions in the Middle East remain minimal. Analysts believe that without significant disruption, prices will struggle to stay elevated.

Crude oil prices fell nearly 4% following signs of easing tensions between Israel and Iran. This drop reversed previous gains driven by conflict fears. Despite initial disruptions, key energy infrastructure remains unaffected, calming market concerns. Nevertheless, the situation remains fluid, with potential for renewed hostilities.

OPEC's crude oil production increased by 180,000 barrels per day in May, with output rising less than planned due to past overproduction compensation. Saudi Arabia, Iraq, the UAE, and others have adjusted output to meet new quotas, easing oversupply concerns against the backdrop of Middle Eastern tensions.

【Oil-Producing Countries Dynamics】

Iraq's crude exports to the U.S. exceeded 5 million barrels in May, highlighting a strong demand for heavier Middle Eastern grades amid OPEC output curbs and moderated U.S. shale growth. Nevertheless, geopolitical risks remain high due to Israel-Iran tensions, potentially threatening Iraq's export stability.

【Latest Oil Policies】

The European Commission plans to propose a ban on new contracts for Russian gas, requiring a majority vote approval instead of unanimity. Hungary and Slovakia will be granted exemptions to phase out Russian gas contracts by 2027. The EU's roadmap aims to end Russian energy dependency by 2027.

【Industry News】

Mitsubishi Corp. is negotiating to acquire Aethon Energy Management's shale and pipeline assets for up to $8 billion. The acquisition would enhance Mitsubishi's presence in shale gas, strategically located near Gulf Coast LNG facilities. The company is also involved in global LNG projects, potentially investing in Alaska LNG.

President Trump has removed NRC Chairman Christopher Hanson, potentially reshaping U.S. nuclear regulation. New leadership could expedite licensing processes, facilitating next-generation nuclear technologies. This shift may influence U.S. competitiveness in nuclear exports and affect tech giants reliant on nuclear power agreements.

The Israel-Iran conflict affects global markets, but core energy infrastructure remains intact for now. Iran's energy sector remains a financial lifeline, avoiding direct conflict involvement. Maritime threats and potential escalation in regional conflict, like targeting key infrastructure, could have significant global implications.

【Others】

The Israel-Iran conflict's impact on oil prices, initially causing significant increases, reversed as diplomatic signals emerged. While infrastructure remains undamaged, market volatility persists, reflecting ongoing geopolitical uncertainties. Traders are closely monitoring developments, with potential economic impacts on inflation and monetary policies.