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Oil markets (CL=F, BZ=F) are experiencing a rebound along the broader market and as tensions rise in the Middle East. Sankey Research president and lead analyst Paul Sankey joins Asking for a Trend to discuss the movement and the state of demand in China.

"This latest issue that we're facing between Israel and Iran is not in itself even a new twist to the plot. And in that regard, if you think back to, say, 2019, when Iranian proxies attacked Saudi Arabia and knocked out 7 million barrels a day of capacity, or when Russia invaded Ukraine in 2022, I'm sad to say that the current environment is not very scary for oil supply interruptions. I will say that the markets are quite scary. So the financial markets are really driving oil right now," Sankey explains.

Focusing on demand in China, Sankey says, "It's very hard to see China replicating the growth that they gave you over the last 10 or 20 years." He explains that this is not "the end of the world," but it's certainly lower than previous levels of demand. "There's also question marks over the extent to which China's building inventory behind all this. So maybe that's adding a bit of additional demand out of Asia," he adds. As Iran supplies a lot of oil to China, Sankey is cautiously watching to see if that trade will be allowed to continue: "If Iran is going to continue supplying and isn't interrupted, then we have too much oil. And that's a big reason why we're pretty bearish."

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend

This post was written by Melanie Riehl