Oil Held Back, Diplomatic Optimism Struggled with Hormuz Blockade
Oil prices struggled to halt a sharp decline from this week's highs, as the US and Iran pushed for further talks to end the war that has nearly paralyzed the Strait of Hormuz. Brent traded around $96 per barrel, near the level seen before peace talks collapsed last weekend, after dropping nearly 5% on Tuesday.
Sentiment improved after reports that the US and Iran were closer to an agreement to extend the current ceasefire. President Donald Trump also said the war was "very close to ending" and described the next two days as "extraordinary," reinforcing market expectations that diplomacy could take the lead in preventing escalation.
However, the market remains clouded by the aftermath of the major supply shocks stemming from the conflict, as key Persian Gulf producers lost access to vital export routes and energy infrastructure came under attack. Some say the US and Iran are seeking additional discussions before the April 7 ceasefire expires next week, amid assessments that supply recovery, if any, is likely to be gradual.
Diplomatic optimism is a key factor suppressing risk premiums, but tensions in shipping lanes remain a key variable. The US continued its blockade of Hormuz to curb Iranian oil exports, and the commander of US Central Command, Admiral Brad Cooper, stated that US forces had “completely halted trade in and out of Iran by sea.” Iran warned that the move could constitute a ceasefire violation if it persisted.
In the physical market, surging prices for crude oil and products like gasoline have weighed on consumers and depressed demand, with the IEA reportedly forecasting lower consumption this year. Some physical market forces have also reportedly eased recently, indicating that market participants do not expect disruptions to last for months, although the Dated Brent benchmark remains above $120 per barrel.
While Asian importers are feeling the brunt of the pressure—Japan is preparing a second release from its national stockpiles starting in early May—the market is also watching another tightening factor: the US government is reportedly letting a temporary waiver allowing certain purchases of Iranian oil expire this weekend. Data-wise, the American Petroleum Institute reported that US crude inventories rose by 6.1 million barrels last week; if confirmed by Wednesday’s official data, that would be the eighth consecutive increase and could influence near-term price direction. (gn)*
Source: Newsmaker.id
