Oil Rallies, Trump-Xi Lack of Hormuz Breakthrough Strengthens Risk Premium
Oil prices rose sharply on Friday (May 15) after a meeting between US President Donald Trump and Chinese President Xi Jinping failed to produce significant progress on increasing energy flows through the Strait of Hormuz. The lack of a breakthrough reinforced concerns that global supply disruptions will persist, amid a fragile US-Iran ceasefire.
WTI for June delivery rose 4.2% to close at US$105.42 per barrel. Brent for July delivery rose 3.4% to close at US$109.26 per barrel. Weekly, WTI rose more than 10% and Brent rose 8%, with Brent remaining above US$100 for the fourth consecutive week.
Trump said he did not encourage Xi to pressure Tehran to reopen Hormuz, while shipping flows weakened again amid reports of ship seizures around the waterway. China is Iran's largest oil buyer, so the market considered signals from the summit crucial for assessing the chances of normalizing energy flows, but the outcome has yet to alleviate uncertainty.
In the physical market, renewed strength has been seen in recent days, underscoring tight supply conditions. The International Energy Agency (IEA) stated that the nearly 11-week conflict has rapidly depleted global oil inventories, and the market risks remaining "seriously undersupplied" through October even if hostilities end next month. Few tankers have managed to exit the Persian Gulf since the conflict began, hindering the flow of oil, fuel, and natural gas to global customers.
The oil rally has also reaffirmed the inflation channel, reflected in a broad sell-off in the bond market on Friday due to concerns that normalizing oil flows will not happen quickly. Looking ahead, the market is also beginning to see structural impacts: the United Arab Emirates said it will complete construction of a pipeline bypassing Hormuz next year, which would double export capacity outside the narrow waterway—an indication that geopolitical risks are forcing permanent adjustments to regional energy infrastructure. (arl)*
Source: Newsmaker.id
