Oil prices erase all war premiums in 11 days, with Brent falling below pre-war levels; however, inventory shortages may trigger a rebound.
BlockBeats reported that on June 26, international oil prices quickly fell back to pre-conflict levels between the US and Iran, with the entire conflict-driven gain erased in just 11 days, surprising the market. On Thursday, Brent crude once fell to $72.06, breaking below the pre-war last trading day’s closing price of $72.48, and has dropped over 39% from the March high of $118.35; WTI crude closed at $71.92, down about 36% from its high.
This round of decline has been much faster than expected. Previously, industry consensus was that clearing mines in the strait would take time and Gulf production recovery would take several months, but reality progressed significantly faster. JPMorgan analysts pointed out that the market has rebalanced through a "remarkably different combination of demand loss and inventory drawdown," far from the initial assumptions.
However, such a quick easing may not be stable. S&P Global data showed that on Wednesday, 78 oil tankers passed through the Strait of Hormuz, setting a new high since the conflict, but this still only amounted to 57% of pre-conflict levels, with a large portion being previously trapped shipping capacity departing together.
The head of commodities strategy at TD Securities warned that the market may be overestimating the speed of supply and inventory recovery. Inventory pressure has become a key variable. US Cushing inventories fell to 19 million barrels last week, about 1 million barrels below the level needed to keep the system stable; TD Securities expects that the world may need to draw an additional 600 million barrels from inventories by October, and once inventories fall below the critical threshold, oil prices could quickly rebound.
Regarding the outlook, Mizuho Securities analysts believe the market is now in an "oversold" state and predict oil prices could rebound to the $80 range in the coming weeks. Full recovery of production in countries such as Iraq and Kuwait is expected only by this fall, which could lead to another shift in the supply and demand picture by then.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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Updated Version 3 - According to the Financial Times, McKesson and CD&R are close to reaching a deal worth more than $5 billion to acquire Option Care.
In the fifth paragraph, a quote from analyst Sahil Pandey was added. Reuters, October 5 - According to the Financial Times, citing informed sources, pharmaceutical distributor McKesson (MCK.N) and private equity firm Clayton Dubilier & Rice are about to reach an acquisition agreement to purchase infusion service provider Option Care Health, with the deal valued (including debt) at over 5 billions USD. After the report was published, Option Care's share price rose by 21% in after-hours trading. The report stated that the deal could be announced as early as Tuesday, but negotiations could still fall through. This potential acquisition would be McKesson’s latest move in expanding its healthcare services portfolio. In August this year, the company agreed to acquire Precision Medicine Group for about 2.25 billions USD (link), as part of its effort over the years to strengthen high-growth business sectors. Leerink Partners analyst Michael Cherny said the “strategic logic” of the deal makes sense, as it would expand McKesson’s business from physician offices to care settings in the home and alternative sites. Option Care provides infusion services that allow patients to receive intravenous treatments at home or other outpatient settings, eliminating the need to go to the hospital. McKesson has previously been restructuring its business portfolio by divesting non-core assets and investing in fields such as oncology and specialty care (link). Driven by the growth of its specialty distribution business and contributions from acquisitions, revenue for its oncology and multi-specialty business segment grew by 33% in the latest fiscal quarter. McKesson declined to comment, while CD&R and Option Care did not immediately respond to Reuters’ requests for comment regarding the report. (For non-English speakers' convenience, Reuters offers automated machine translations of its reports in several languages. As there may be mistakes in the automated translations or some context may not be included, Reuters does not guarantee the accuracy of the automated translation text, which is provided solely for readers’ convenience. Reuters bears no responsibility for any damages or losses caused by the use of automated translation functions.)
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