News and Articles

• Brent held above USD105 per barrel after a three-session rally of more than 7% driven by tightening fundamentals
• IEA reported global oil inventories fell roughly 4 million barrels per day in March and April, a record pace
• Saudi production dropped to a 1990 low and Iranian export flows have stalled for the first sustained interruption since February
• US crude inventories fell 4.3 million barrels last week, nearly double market expectations, while distillate stocks rose 190,000 barrels
• IEA expects the market to remain undersupplied until October even if the Middle East conflict ends sooner

Brent crude futures held above USD105 per barrel into mid-May after climbing more than 7% across three consecutive sessions, with traders absorbing fresh data from the International Energy Agency that pointed to one of the sharpest inventory drawdowns in years. The agency reported in its latest Oil Market Report that observed global stockpiles fell by roughly 4 million barrels per day across March and April, a record pace, and warned that further volatility is likely ahead of the peak summer demand season.

The supply picture has been compounded by movements on the producer side. Saudi Arabia informed OPEC that its production had slipped to the lowest level since 1990, removing a meaningful tranche of swing-barrel flexibility from the market. Iranian export shipments have stalled in recent weeks, the first sustained interruption since the Middle East conflict began, leaving refiners across Asia to scramble for alternative cargoes. Asian buyers, including Japanese refiners, have been actively seeking replacements for Persian Gulf supplies, a shift that is rerouting trade flows and widening regional spreads.

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US government data added to the tightness narrative. Crude inventories fell by 4.3 million barrels in the latest weekly report, nearly double market expectations, while distillate stocks rose by 190,000 barrels, the first weekly build since March. The mixed signal suggests crude balances are tightening faster than refined product demand is loosening, a configuration that historically sustains backwardation in forward curves. Crude oil and fuel movements through the Strait of Hormuz fell by nearly 6 million barrels per day in the first quarter after the conflict erupted in late February, a structural disruption that has yet to ease and that the EIA continues to monitor closely.

The IEA cautioned that the market could remain severely undersupplied until October even if the conflict were resolved as soon as next month, an assessment that is shaping near-term refiner behaviour. Some plants are reportedly delaying scheduled turnarounds and prioritising operational stock rebuilds before the driving season begins in earnest. Trump administration commentary on the situation has so far downplayed concerns ahead of upcoming talks with Chinese President Xi Jinping, though Washington has intensified pressure on Tehran through fresh sanctions on entities involved in Iranian crude sales.

For procurement teams, the rally is filtering quickly into naphtha and gasoline crack spreads, petrochemical feedstock pricing, jet and diesel surcharges, and the cost basis for asphalt, base oils, and polymer chains tied to ethylene and propylene economics. Buyers of plastic resins, polyester intermediates, packaging substrates, and bulk solvents are likely to face cost-pass-through requests within weeks. Forward hedging activity has increased on both Brent and WTI, and contract negotiations for Q3 delivery are expected to bake in a higher floor, particularly for cargoes routed via the Cape of Good Hope. Buyers with bunker-linked freight clauses should also model the downstream impact on ocean and trucking surcharge components, which typically lag spot crude by four to six weeks.