The three reasons why oil is staying below $100 a barrel

By Finance News On Jun 3, 2026

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POWER POINT

What I’m hearing from energy insiders

With so many problems still around Iran and the Strait of Hormuz, why are oil prices so far off from their recent highs?

It’s the question I get asked most often these days, which is generally followed up immediately with some version of “but there’s no way oil prices keep going down, right?”

My take → I assume these questions come from those who are quietly long oil and are shocked that crude is below $100 in the futures market.

Whatever anyone’s positioning, it’s a fair question: why is oil well off its highs? In May, crude had its biggest monthly drop ever. Yet the fighting is far from over. Iran says the U.S. broke the ceasefire. Its military is still lobbing missiles at U.S. forces in the Middle East. Yemeni terror group the Houthis are now threatening to jump in and harass ships in the area. Every day there’s a new source of worry.

So why is oil in the mid $90s and not well over $100?

Three primary reasons:

One: Real optimism that the Iran conflict/war is soon settled.

Iran needs oil because it brings in money. Iran has a massive economic incentive to get back to ‘normal,’ whatever that may look like. Iran is a petroeconomy. Oil and natural gas are its economy. Without exports, it goes broke. And without money, the people suffer more than they have in the last 30+ years. Even without weapons, those people will have a breaking point, as whoever is running Tehran right now is no doubt keenly aware. They want a fix to this, and hopefully one can come sooner rather than later. And I’m not a Pollyanna about this. I’ve been very clear in my reporting that things are far from peaceful with Iran and, given that there are very angry rogue IRGC bosses with access to weapons, it is entirely possible that fighting flares up again. If so, oil spikes again. The world turns on the day-to-day headlines.

My take → My sources continue to tell me that Iran still has a power vacuum at the top, and it’s probable the world will hear often conflicting comments and actions for the foreseeable future.

Two: China demand is falling.

JPMorgan star analyst Natasha Kaneva had an eye-opening note this week. She just got back from China and reports that she was shocked to see how much Chinese oil demand had been cut. She writes:

“We spent last week in China, and the most striking takeaway from our meetings was not simply that oil demand has fallen. It was that it may have dropped by as much as 9% or 1.5 mbd — abruptly, unexpectedly, and with remarkably little visible disruption.”

While 1 ½ million barrels per day may not seem like a whole lot, in a country with more than 1 billion barrels of oil in storage, it’s significant because it reduces the drawdown. It’s also roughly close to the same volume of oil that…