The global economy currently enjoys a healthy oil surplus, write Brown and Melville in a June 24 note. “This helps keep prices in the mid- to low-US$70s, a historically moderate range. Despite the events of recent days, there has not yet been any significant disruption in oil flows from the region.”
An oversupply of oil has kept prices under US$80 a barrel, while the risk premium has already been priced in following the initial exchange of fire between Israel and Iran earlier this month, say Schroders’ senior economist George Brown and fund manager Malcolm Melville.
This would explain the markets’ “muted” reaction to the US strikes on Iran over the weekend, with the oil price falling back after an initial surge beyond US$81 ($103.76) a barrel.
