Oil prices continued their upward trend on Thursday, driven by escalating fears of a prolonged blockade on Iranian exports and stalled diplomatic negotiations.
Key Drivers for Oil Price Gains
The market reacted to reports indicating that tensions between the U.S. and Iran remain high, suggesting supply constraints could persist.
- Strait of Hormuz Blockade: Reports cited by Axios indicated that Donald Trump rejected Tehran's proposal to reopen the Strait of Hormuz, suggesting the naval blockade will remain active until a comprehensive nuclear agreement is reached.
- Market Reaction: Following these developments, crude oil prices rose significantly.
- Brent Crude: Increased by approximately 1.96% to reach around $120 per barrel.
- WTI Crude: Rose by 0.2% to settle at $107.09 per barrel.
Supply Concerns and Analyst Insights
Goldman Sachs provided analysis suggesting that supply tightness is being exacerbated by geopolitical risks and export limitations.
- Export Restrictions: The bank estimates that exports passing through the vital Hormuz chokepoint have fallen to only 4% of normal levels.
- Supply Tightening: The combination of stalled U.S.-Iran talks and the ongoing blockade is cited as a factor tightening global oil supplies.
- Long-Term Outlook: Analysts noted that while constrained Iranian exports and limited storage capacity could deepen disruptions, the expected output boost from the UAE following its OPEC exit is projected to materialize gradually, rather than immediately offsetting current tightness.
Emerging Demand Risks
Despite the supply concerns, Goldman Sachs also cautioned investors regarding potential weakness in global demand.
- The bank flagged that global oil consumption in April might be approximately 3.6 million barrels per day lower compared to February levels.
- This anticipated weakness is expected to be concentrated in specific sectors, namely jet fuel and petrochemical feedstocks.
