Vitol's Bahrain head says that the oil market may be undervaluing risks

Tom Baker, managing director of global commodity trading company Vitol for Bahrain, stated on Tuesday that the oil market is undervaluing certain risks from Iran's?war.

The Iranians' effective closing of the Strait of Hormuz, and their attacks on energy infrastructure, including oilfields, refineries and oilfields, has taken 14 million barrels of Middle East oil supply offline. This is the biggest oil supply crisis ever.

Baker said at the S&P Global Energy Middle East Petroleum and Gas Conference held in London that "Crude could come back online but it may be difficult for the system to catch-up the rest of the season."

The turning point could come when someone needs the physical molecule and they are not available to purchase.

Oil prices rose to $126 per barrel due to the Middle East conflict, and then fell back down and were at $95 per barrel on Tuesday.

Baker stated that China will not be able to import 5 million barrels per day indefinitely, so at some point, when they need those barrels, prices must go up.

Demand destruction is when prices are'so high due to shortages of supply or other factors that consumers have to cut back on purchases until the demand and price balances.

Vitol’s Baker?added that it is unlikely for demand to be destroyed as oil prices fall towards $90 per barrel.

(source: Reuters)