The outlook for oil is balanced on a knife’s edge

Oil prices are up over 30% since hostilities began in February, though they've pulled back from April highs. The market is currently balanced, but risks remain without a peace deal.

Buffers like global petroleum reserves and non-Gulf production have provided resilience. China's pre-war reserve replenishment and a "dark fleet" of tankers have also helped offset disruptions. However, these buffers are diminishing, with US and European natural gas reserves at historic lows.

New land and pipeline routes in Syria, along with boosted Venezuelan production, offer some relief. Diplomacy, particularly from China, could drive a peace deal. We see this geopolitical uncertainty as a potential entry point in oil and gas, favoring companies with diverse assets and those that service them.