According to Wood Mackenzie, the oil price could rise significantly again if the current supply disruptions from the Gulf persist. In a recent analysis, the consultancy concludes that the market can only return to balance after such a deep supply-side shock through falling demand. This could require a price level of $150 per barrel. At the same time, Wood Mackenzie does not rule out levels of $200 per barrel this year.
The analysis is based on an exceptionally large supply outage. According to Wood Mackenzie, 15 million barrels of daily exports from the Gulf are currently no longer available on the global market. In total, the Gulf states are said to produce around 20 million barrels of liquids per day. The loss of such a large export volume is unprecedented on this scale. Accordingly, pressure on the global oil price is high, especially as many regions depend heavily on supplies from this area.
As early as the start of the week, prices rose back above $100 per barrel due to intensified competition for the remaining volumes. According to the analysis, the markets most affected are those that rely heavily on Gulf exports. The impact is therefore not only visible in the crude oil market itself, but increasingly also in refined products such as diesel and kerosene.
Oil price reacts to historic Gulf outage
Wood Mackenzie emphasizes that the industry has not previously experienced a loss of this magnitude. Even if the conflict were to end, supply chains are not expected to restart at full speed immediately. Product volumes already in refineries or ports could be shipped comparatively quickly. However, it becomes more difficult if production wells remain shut in for an extended period. In that case, it could take weeks or even longer for output to return to its previous level.
This is crucial for the oil price because the market is reacting not only to the current supply outage, but also to the prospect that the disruption cannot be resolved in the short term. It is precisely this uncertainty that, according to Wood Mackenzie, is further driving price formation. The remaining barrels are becoming scarcer, while buyers in several regions of the world are simultaneously looking for alternatives.
This is particularly evident in Europe and Asia. According to the analysis, Europe faces an acute challenge because in 2025 refineries from the Gulf would have covered around 60% of Europe’s kerosene demand and 30% of its diesel supply. These volumes have now disappeared entirely. This matters for Europe because not only crude oil, but also already processed products are missing.
Europe and Asia increase pressure on the oil price
The situation is also tense in Asia. The region takes the largest share of crude oil exports from the Gulf and must now look for other sources of supply. According to Wood Mackenzie, buyers from China, India and other Asian countries have begun increasingly securing alternative cargoes. As a result, prices for crude oil from West Africa and Latin America have already risen.
This development further increases pressure on the oil price because Europe and Asia are thus entering into direct competition for limited volumes outside the Gulf. Competition is therefore shifting to the rest of the global market and pushing premiums there even higher. In this context, Wood Mackenzie also points to exceptionally high crack spreads, i.e., the margins between crude oil and refined products.
In Northwest Europe, the crack spread for kerosene temporarily stood at $100 per barrel. That corresponds to a Brent level of nearly $200 per barrel. For diesel, the analysis observed crack spreads of $70 per barrel. That is four to five times higher than the level before the war. These figures show that market tightness is no longer limited to crude oil, but is affecting the entire supply of oil products.
Strategic reserves are not sufficient, according to Wood Mackenzie
Wood Mackenzie sees strategic petroleum reserves as a certain buffer, but in the analysts’ view this cannot fully replace the lost volumes. According to the analysis, member states of the International Energy Agency hold stocks equivalent to 90 days of their imports. However, sustained releases on this scale are without precedent, and IEA members account for less than half of global oil demand.
Looking back at previous crises also makes Wood Mackenzie rather cautious. During the Russia-Ukraine crisis, strategic releases could not prevent the oil price from rising to $125 per barrel. Today’s supply gap, however, is significantly larger. As a result, another draw on reserves appears, from the analysis’ perspective, to be more of a limited relief than a real solution.
Alternative sources of production would also be unable to quickly offset the outage. Higher prices would create incentives for producers in the US to accelerate output and postpone maintenance work. But even then, the Lower 48 could provide only a few hundred thousand additional barrels per day within three to six months. Compared with a shortfall of 15 million barrels per day, that is only a small contribution.
Oil price of $150 as a mechanism to reduce demand
Because no viable short-term solution is in sight on the supply side, Wood Mackenzie ultimately sees only the demand side as the balancing mechanism. The market would have to dampen global oil demand from the current 105 million barrels per day until balance is restored. In the analysts’ view, this would require a Brent price of at least $150 per barrel in the coming weeks.
Such an oil price would curb demand through several channels. Industrial companies could reduce consumption, oil-intensive uses in transport could be replaced, an economic slowdown would reduce overall activity, and consumers would cut back on discretionary travel. According to Wood Mackenzie, this process of demand reduction is necessary if the missing supply cannot be replaced.
How far the oil price actually rises depends, according to the analysis, primarily on how long the war lasts, how long the Strait of Hormuz remains closed, and whether the US Navy can ensure safe passage for ships. From Wood Mackenzie’s perspective, however, one thing is already clear: the outage from the Gulf has reached a scale that is rebalancing the oil market worldwide. Prices of $150 per barrel are not considered an extreme case in this scenario, but a possible level that would be needed to bring supply and demand back together.
