Fragile Ceasefire, Hormuz Flow Remains Unrecovered
Oil prices remained stable ahead of the meeting between US President Donald Trump and Chinese President Xi Jinping in Beijing, with the Iran war, which shows no signs of a quick resolution, remaining a key market backdrop. Market participants held their positions as the direction of diplomacy and energy policy is expected to be largely determined by signals from the meeting.
In Asia, Brent traded below US$106 per barrel after falling 2% in the previous session. At 8:02 a.m. Singapore time, Brent for July delivery was at US$105.52 per barrel, while WTI for June delivery was relatively flat at US$100.99. Trump said this week that trade talks would take priority over the Middle East conflict, even though China is the largest buyer of Iranian oil.
From a fundamental perspective, the International Energy Agency (IEA) assesses that the war has squeezed global oil inventories at a very rapid pace, and the market is at risk of remaining "seriously undersupplied" through October even if the conflict ends next month. This pressure is primarily related to logistical disruptions and limited shipping flows from the Persian Gulf region.
The effective closure of the Strait of Hormuz remains a crucial issue. According to the Energy Information Administration (EIA), crude oil and fuel flows through Hormuz fell by nearly 6 million barrels per day in the first quarter since hostilities began in late February, and only a handful of tankers have managed to exit the Persian Gulf during the war. Although a ceasefire has been in effect since early April, progress toward a peace agreement has been minimal, delaying the restoration of supply flows.
Iran's supply pressure is also being driven by the US naval blockade of Iranian ports. Satellite imagery collected by Bloomberg News showed the export dock at the main Kharg Island terminal empty again on Tuesday, and for the fourth consecutive period when satellites captured activity at the facility, no tankers were visible. Meanwhile, ahead of the Trump-Xi summit, the US is also threatening banks and imposing additional sanctions on Iranian oil sales to China.
An additional risk comes from the expiration of a US sanctions waiver that previously allowed the purchase of Russian oil "on the water" this weekend. This situation could potentially make refineries in India, one of the major buyers, more vulnerable, especially after record imports so far this month. The market is now waiting to see whether the Trump-Xi meeting signals de-escalation or prolongs supply uncertainty, with Hormuz and sanctions policy remaining the main drivers of price direction. (asd)*
Source: Newsmaker.id
