Crude oil benchmarks recovered on Thursday, regaining a portion of the steep losses from the prior session, as market participants focused on enduring logistical constraints in a key global shipping chokepoint. This occurred despite the implementation of a two-week ceasefire agreement between the United States and Iran. By early afternoon trading, Brent crude futures had advanced by ninety cents, or one percent, to reach $95.65 per barrel. Concurrently, U.S. benchmark West Texas Intermediate (WTI) crude jumped by three dollars, or 3.2 percent, trading at $97.39. Both contracts had experienced more significant intraday gains, briefly surpassing the $99 and $102 thresholds, respectively.
Market Shifts Focus from Headlines to Physical Supply
The initial market reaction to the ceasefire announcement had been a sharp sell-off, but attention has now pivoted to the tangible scarcity of cargo. Illustrating the extreme tightness in specific grades, North Sea Forties crude soared to an unprecedented $146.43 per barrel. Analysts caution that a full normalization of supply chains could be a protracted affair. Neil Crosby of Sparta Commodities suggested it might take "months before a return to the full supply chain," highlighting the depth of the current disruption.
Strait of Hormuz Traffic at a Standstill
The core of the supply issue lies in the Strait of Hormuz, a maritime passageway that typically facilitates about one-fifth of global seaborne oil and gas trade. Data from ship-tracking services indicated a mere seven commercial vessels navigated the strait over a recent twenty-four-hour period. This figure represents less than ten percent of the normal daily average of approximately 140 transits. The bottleneck has resulted in a queue of hundreds of ships, and alternative sources of crude are not readily available to fill the gap.
Major shipping firms are tempering expectations for a rapid resolution. Hapag-Lloyd's Chief Executive, Rolf Habben Jansen, informed clients that restoring normal cargo flows would likely require "at least six to eight weeks." Similarly, Frontline's Lars Barstad indicated a cautious approach, stating he would await the "fine print" of the ceasefire before making definitive operational decisions.
Financial Institutions Assess the Divergence
Investment banks are analyzing the disconnect between geopolitical developments and physical market realities. Following the truce, Goldman Sachs revised its second-quarter Brent crude price forecast downward to $90 per barrel and its WTI outlook to $87. However, the bank maintained its projections for subsequent quarters, noting that if production losses in the Middle East persist, Brent could still average as high as $115 for the year.
Barclays adopted a firmer stance, emphasizing the continued limitations on Hormuz traffic and estimating current supply disruptions at between 13 and 14 million barrels per day. The bank reaffirmed its $85 per barrel average price call for Brent in 2026 but warned that prices retain upside potential unless a more substantial decline in demand materializes.
U.S. Inventory Data Presents Mixed Picture
Traders also digested conflicting signals from U.S. inventory reports. Commercial crude stockpiles increased by 3.1 million barrels last week, climbing to 464.7 million barrels—the highest level in nearly three years. Conversely, stocks of gasoline and distillates declined, reflecting robust export activity. UBS analyst Giovanni Staunovo characterized the overall report as "neutral."
The U.S. Energy Information Administration (EIA) does not anticipate a quick market rebalancing. In its latest short-term energy outlook, the agency projects Brent will average $96 in 2026, with prices potentially peaking around $115 in the second quarter. Simultaneously, the EIA slashed its forecast for global oil demand growth this year to 600,000 barrels per day, half the 1.2 million bpd growth rate it predicted just one month ago. This significant revision is largely attributed to Asia's greater exposure to supply disruptions originating in the Middle East.
Asian Demand Feels the Pressure
Asia is already experiencing the impact of tightened supplies. According to data from Kpler, seaborne crude oil imports for the region fell to 19.22 million barrels per day in April, a sharp drop from the first-quarter average of 25 million bpd. Refined fuel markets have not eased either; despite recent pullbacks in the prices of jet fuel, gasoil, and gasoline from their peaks, underlying supply conditions remain constricted.
Some market participants are capitalizing on the dislocation. Refiners including Marathon Petroleum, Phillips 66, Valero Energy, and PBF Energy have benefited from widened export margins along the U.S. Gulf Coast, with refinery utilization rates exceeding 95 percent. Consultant Jeff Krimmel noted that U.S. refiners are effectively supplying markets that are "facing scarcity."
Nevertheless, downside risks for oil prices persist if the ceasefire holds and consuming nations continue to draw on strategic reserves. Japan is considering another release from its stockpiles, equivalent to roughly twenty days of national demand. The preceding trading session saw Brent plunge 13.3 percent and WTI tumble 16.4 percent, a dramatic reversal as traders hastily removed the geopolitical risk premium on hopes for a Strait of Hormuz reopening.
Supply concerns continue to dominate the narrative. Saudi Arabia reported a reduction in its oil output capacity by approximately 600,000 bpd, with volumes on its critical East-West pipeline also down by about 700,000 bpd. Sultan Al Jaber, Chief Executive of the Abu Dhabi National Oil Company (ADNOC), described the current state of the strait as "restricted, conditioned and controlled," underscoring the fragile and managed nature of the present situation.
