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HFI Research says the oil market could reach a serious turning point in the coming weeks.
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The company believes there will be “real panic” in the crude oil market as oil inventories are depleted.
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Previously, the agency speculated that panic buying and hoarding behavior could cause crude oil prices to exceed $150 per barrel.
Market watchers have been puzzled by the reasons for the rebound in oil prices in recent weeks, but one research firm warns things could get worse.
HFI Research, an investment research company focusing on the energy market, said it expects the oil market to encounter a major turning point in the first week of June. If the Strait of Hormuz remains closed during this period, the oil market could plunge into a “real panic,” the report said, suggesting that countries around the world may begin panic buying and hoarding oil as oil inventories hit rock bottom.
HFI said this scenario was not its base case, contrary to where most forecasters believe the crude market is headed. The company noted that oil forecasts are more optimistic about how the market will return to normal soon, but that these forecasts may be driven by “psychological biases” in the oil market.
“It seems clear to me that if the Strait of Hormuz remains closed in the first week of June, we will see real panic,” the company wrote in a Substack post on Monday about the coming market turning point.
“Sellers are still assuming a return to normalcy by June to avoid a bottom, but that’s the math.”
Oil prices surged to three-year highs as markets weighed the severity of supply disruptions in the Middle East. International benchmark Brent crude has held steady above the $100 mark for much of the past month, a testament to the scale of the disruption, although the conflict appears to be at a standstill for now.
The market has been spared the greater pain from supply disruptions, largely as the United States and other countries reduce excess crude inventories.
In late April, HFI forecast that the United States would run out of oil inventories within eight weeks, meaning excess supply would be exhausted by the end of June.
According to the latest update from the Energy Information Administration, U.S. petroleum and petroleum product inventories stood at 1.6 billion barrels for the week ended May 8, down 67 million barrels from early April levels.
HFI Research said it believes the oil market has reached a “breaking point” and could eventually enter a vicious cycle, with extreme supply shortages triggering panic buying and hoarding. It did not have a specific price forecast, but speculated in previous posts that crude oil prices could rise above $150 a barrel.