Two dominant forces balance the global oil market: supply and demand. The Iran war has broken both — one perhaps beyond repair.
Supply remains a complete mess. A historic crude glut turned into the worst-ever supply shock before another flood of oil entered the market in June. Now, an intensifying war has again closed off significant access to Persian Gulf oil, reinjecting chaos into the market.
Demand is somehow even more difficult to comprehend.
The world has adapted to the supply shock during five months of war, learning how to cope without using as much oil as it had before the conflict. Hundreds of millions of barrels of oil finally escaped the Strait of Hormuz last month, only to find few willing buyers. Some Middle Eastern crude had to be heavily discounted before it found any takers.
The reasons why the world is turning up its nose at oil are complex.
