Price Performance Summary

Week One Oil Prices: In the early part of the week, the sudden escalation of the US-Iran military conflict led to the disruption of shipping in the globally critical Strait of Hormuz. Brent crude surged 13% at one point, breaking above $82 per barrel, before diving and narrowing its gains to 5%. Subsequently, news broke that a Saudi Aramco refinery on the Persian Gulf coast had suspended operations after being targeted by a drone strike. As this was one of the first major impacts on physical oil infrastructure, prices rebounded, closing with a 7.26% gain. Mid-week, rumors that Iranian officials had proactively contacted the CIA to propose talks buoyed the stock market, curbed the dollar's momentum, and temporarily narrowed the crude price rally. However, Tehran later dismissed reports of conflict-ending negotiations with the US, and severe market doubts emerged regarding the actual effectiveness of US military escorts, causing oil prices to expand their gains once again. In the latter part of the week, production cuts by multiple OPEC members, combined with Qatar shutting down LNG production and exports due to an Iranian drone strike, created acute supply disruption risks. This drove Brent crude up a massive 8.52% to $92.69, hitting an over two-year high fueled by both safe-haven capital and physical supply chain panic.

Week Two Oil Prices: Early in the week, as the US and Israel continued to expand military operations against Iran—met with a hardline stance from Iran—shipping remained blocked and storage space rapidly depleted. With multiple OPEC members cutting production, market fears of a supply disruption skyrocketed, driving prices soaring. Brent crude hit a new high of $119.50/barrel, and WTI peaked at $119.48/barrel. Mid-week, reports that the US was relaxing sanctions on Russian oil, coupled with expectations of a coordinated release of Strategic Petroleum Reserves (SPR) and profit-taking triggered by technical overbuying, led to a drop in prices. By the end of the week, however, reports of multiple tankers and commercial vessels being attacked surfaced. Iran maintained its hardline stance on keeping the Strait of Hormuz closed, Hezbollah launched massive rocket attacks on Israel, and the market worried that Houthi forces might join the fray and affect Red Sea shipping. This prompted the market to reassess supply disruption risks. Even though the IEA announced the approval of a record 400 million-barrel release from strategic reserves to stabilize the market, the lack of a detailed release plan left the market skeptical. This drove oil prices back up, with Brent crude holding steady at around $100 per barrel.

Monthly Agency Reports: EIA Downgrades Year's Supply Growth; IEA Cuts Both Supply and Demand Growth; OPEC Retains Existing Forecasts

Supply and Demand Forecasts from the Three Major Agencies

EIA

According to the EIA's March Short-Term Energy Outlook, attack threats and canceled insurance in the Strait of Hormuz have led to a disruption in crude oil exports from the region. The EIA expects Brent crude to remain above $95/barrel over the next two months. However, as shipping gradually recovers, prices are projected to fall to $70 by late 2026, with an estimated average price of $64/barrel in 2027. US production activity is expected to strengthen due to high oil prices, with US crude production projected to average 13.60 million barrels per day (mb/d) in 2026 and rise to 13.80 mb/d in 2027—an upward revision of 500,000 bpd from last month, largely driven by pipeline capacity expansions in the Permian basin and price incentives.

Regarding LNG, although global (especially European and Asian) LNG prices have spiked due to the Strait of Hormuz disruption, the US market has been less affected. Mainly because February weather was warmer than expected, leading to higher-than-expected inventories, the EIA revised its 2026 Henry Hub spot price forecast down 13% to $3.76/MMBtu, and its 2027 forecast down to $3.85/MMBtu. Additionally, high oil prices are stimulating oil drilling, which in turn drives growth in "associated natural gas" production. Natural gas production is expected to reach 124 Bcf/d in 2027, an increase of 2 Bcf/d from last month's forecast. Meanwhile, US LNG export facilities are nearing full capacity, rendering them unable to further increase export volumes to fill the global gap in the short term, thereby decoupling domestic US prices from the international market.

On the power demand front, a 1.2% growth is expected in 2026, and a 3.1% growth in 2027, led by the Texas (ERCOT) region. Due to the anticipated retirement of roughly 4% of coal power capacity in 2026, alongside the growth of renewable energy, coal-fired power generation is expected to drop by 7% in 2026.

IEA

The IEA's March report indicated that due to global oil market supply disruptions caused by the Middle East conflict, Persian Gulf nations have cut total oil production by at least 10 mb/d. On the supply side, global oil supply is expected to plummet by 8 mb/d in March. Although production increases from Kazakhstan, Russia, and non-OPEC+ producers have offset some losses, the overall supply situation remains grim; the IEA has lowered its 2026 global oil supply growth estimate from an average of 2.4 mb/d to 1.1 mb/d, with non-OPEC+ producing nations contributing all of the growth. On the demand side, citing climbing oil prices, flight cancellations, and global economic uncertainty, the IEA cut its global oil demand growth forecast for March and April by an average of more than 1 mb/d. It also lowered its 2026 global oil demand growth forecast to 640,000 bpd year-over-year, a reduction of 210,000 bpd compared to last month's 840,000 bpd forecast. On the refining side, multiple refineries and natural gas processing facilities have closed due to attacks or security concerns. The standstill in the Strait of Hormuz has also forced export-oriented refineries to cut or entirely halt production. Over 3 mb/d of refining capacity in the region has been shut down, and with refined product storage tanks nearing full capacity, over 4 mb/d of refinery capacity is at risk.

IEA member nations reached a consensus on March 11 to release 400 million barrels of oil from their emergency reserves into the market to mitigate the negative economic impacts of the supply disruption. They noted that the ultimate impact of the conflict on the oil and gas market and the broader economy depends not only on the intensity of military attacks and the extent of damage to energy assets but, more crucially, on the duration of the shipping disruption in the Strait of Hormuz. Adequate insurance mechanisms and physical protection of shipping will be key to restoring maritime transport.

OPEC

OPEC's March monthly report estimates remain largely consistent. The global economic growth forecast was unchanged from last month, at 3.1% for 2026 and 3.2% for 2027. On the demand side, the 2026 global oil demand growth forecast was consistent with last month, maintaining 1.4 mb/d; the 2027 demand growth is projected at roughly 1.3 mb/d, primarily driven by non-OECD country demand. On the supply side, for both 2026 and 2027, Non-DoC country production is expected to grow by roughly 600,000 bpd year-over-year, unchanged from last month's estimate, led by Brazil, Canada, the US, and Argentina.

On the refining front, refinery margins in the Atlantic Basin have risen, mainly due to a decline in refined product output caused by seasonal refinery maintenance. In addition, geopolitical tensions and concerns over disruptions to refined product supply flows have further boosted refinery margins. On the US Gulf Coast, refining margins were supported by strong demand for gasoline and distillates (such as diesel). In the Rotterdam market, prices for all refined products increased, with the exception of low-sulfur fuel oil (LSFO). However, in the Singapore market, refining margins declined. The reasons include increased regional gasoline inventories, rising supplies of jet fuel and kerosene in Southeast Asia, and margin pressure from higher feedstock costs like crude oil.

US Crude Oil Market Data Update

Crude continues to accumulate due to falling net exports, refined product drawdowns beat expectations, refineries prep early for spring/summer driving season, and capacity utilization rebounds to 90.8%.

From March 2 to March 13, US crude inventory data published by the EIA showed that crude oil continues to accumulate, while the drawdown of refined products outperformed expectations. Over these two weeks, US commercial crude inventories cumulatively increased by more than 7 million barrels to 443.1 million barrels, driven largely by a significant jump in crude imports and a drop in exports: for the week of March 6, US net crude imports climbed to approximately 6.5 mb/d. Influenced heavily by recent Middle East geopolitical tensions and shipping risks in the Strait of Hormuz, some traders built buffer inventories early to hedge against supply chain risks, causing a massive influx of imported crude into the US. Simultaneously, exports decreased by about 563,000 bpd, and net imports for the week increased by roughly 661,000 bpd, causing crude accumulation and pushing inventories higher. The primary reason for the drop in exports is that more crude was redirected into domestic storage, particularly the Strategic Petroleum Reserve (SPR), and supplied to domestic refineries. Moreover, inventories increased at both the Cushing delivery hub and the Gulf Coast, indicating that inbound logistics outpaced outflows.

At the same time, refined product inventories experienced a better-than-expected decline. Gasoline inventories dropped cumulatively by about 5.35 million barrels, primarily because as the US transitions into warmer spring weather, domestic travel demand has seen a notable seasonal uptick. Faster lifting rates at the retail end led to rapid inventory depletion. Distillate inventories fell by about 1 million barrels, mostly because even though winter heating oil demand is gradually decreasing as temperatures rise, US domestic freight logistics and manufacturing indices remain robust; a recovery in freight and warehousing activities drove up fuel demand. Refineries stepped up processing runs in preparation for the upcoming spring and summer driving season, with crude throughput increasing by about 328,000 bpd and refinery utilization rebounding to 90.8%. Although utilization rose from 89.2% to 90.8%, refineries have only just emerged from Q1 turnaround maintenance, and the pace of capacity recovery is still trailing the current consumption of refined products.

Key News Commentary

IEA to Release a Record 400 Million Barrels from SPR to Stabilize the Market, Yet the Market Remains Skeptical

Due to the conflict disrupting Persian Gulf oil exports, IEA member countries have agreed to release 400 million barrels of crude from reserves to alleviate surging oil prices. This deployment includes 172 million barrels from the US Strategic Petroleum Reserve (SPR). However, oil traders are expressing skepticism. Even if the maximum drawdown rate of the US SPR is combined with the oil delivery capacity of other IEA member nations, it may only cover a fraction of the 11 to 16 mb/d supply loss from the Persian Gulf. According to US Department of Energy data, the maximum release capacity of the SPR is 4.4 mb/d, taking 13 days to enter the open market. Yet, past DOE analysis from 2016 indicated that the actual release volume might only be 1.4 to 2.1 mb/d, meaning it would take approximately 120 days to fully deliver the total US energy commitment. Due to this track record, the market harbors deep concerns about the actual volume and speed of the IEA oil reserve release, and it remains unclear whether it can bridge the supply gap.

Despite positive official signals, the 400-million-barrel release scale is insufficient to offset the massive gap on the supply side. Paradoxically, this move might be bullish for oil prices, as the release weakens the market's incentive to seek alternative supplies. Should the Strait of Hormuz remain closed long-term and further energy infrastructure be attacked, buffering options will become even more limited. Since the conflict broke out on February 28, oil supply has decreased by about 175 million barrels, with approximately 12 to 13 mb/d of supply currently offline from the global market. Furthermore, due to storage space nearing saturation, at least 5 mb/d of capacity has been forced to shut in, a figure that could rise to 8-10 mb/d. The reserves released by the IEA can only sustain about three weeks of wartime consumption; while it can temporarily stabilize market sentiment, it cannot fundamentally reverse the supply-demand imbalance. If the conflict extends beyond the end of March, the IEA may be forced to initiate additional reserve releases. Currently, the IEA has not announced a detailed release plan, and the proportion of crude versus refined products remains unclear. Following the announcement, international oil prices rose instead of falling, surging roughly 8% during early Asian trading on March 12.

US Airstrikes on Kharg Island; Attack on Iranian Oil Hub Sparks Fears of Further Supply Turmoil

On the 13th, Trump announced that the US had executed one of the most powerful bombing campaigns in Middle East history, destroying all military targets on Iran's Kharg Island, though refraining from bombing the island's oil infrastructure. The US airstrike on Kharg Island is viewed by the market as a key event in the escalation of the Middle East energy conflict. Located in the Persian Gulf, the island is Iran's most critical oil export hub, handling about 90% of Iran's crude exports via its storage and loading facilities, and has long been considered the economic lifeline of Iranian energy.

The airstrikes specifically targeted the island's military facilities and defense systems without directly damaging oil infrastructure. Assuming no further attacks, the island's loading terminals, storage tanks, and pipelines remain intact, meaning the impact on oil supply could be relatively limited; Iran's oil export capacity could still be maintained at roughly 1.5 to 1.7 mb/d. However, the US concurrently warned that if Iran continues to interfere with maritime transport or block the Strait of Hormuz, further attacks on the island's energy facilities are not off the table. If the Kharg Island oil fields are shut down, it would quickly trigger upstream production cuts and put up to 50% of Iran's oil output at risk. From a market perspective, the importance of this event lies not in the actual supply losses incurred, but in the dramatic expansion of potential supply risks. Kharg Island is not only Iran's primary export port but also the terminus of its crude pipelines and a loading center for supertankers. Should oil storage facilities or terminals be destroyed, Iran's multi-million-barrel daily export capacity could plummet in a very short time. Thus, even though this attack did not directly destroy oil infrastructure, the market rapidly interpreted it as a precursor to a major escalation in supply disruptions.

US Eases Sanctions, Allowing Russian Oil Sales to Help Stabilize Oil Prices

To stabilize the global energy market affected by US and Israeli military actions, the US Treasury Department announced a temporary relaxation of sanctions on Russian oil. On March 12, it issued a 30-day license allowing countries to purchase Russian oil that had been loaded on or before that date and was stranded on tankers due to sanctions. The license is valid until April 11, 2026. Prior to this, the US took a more limited measure on March 6, easing sanctions for Indian refineries for 30 days to allow them to buy Russian oil stranded at sea. Following that initial exemption, India rapidly snapped up 30 million barrels of seaborne oil. The US Treasury stated that this measure applies only to oil already in transit and therefore will not generate significant material financial benefit for the Russian government, as Russia's energy revenue is primarily derived from extraction taxes. However, multiple US allies expressed strong dissatisfaction with the move, fearing that Russia will profit from the surge in energy prices and use these extra funds to finance its war in Ukraine. Data shows that in the 12 days since the US entered the war against Iran, Russia has already booked an additional $1.3 to $1.9 billion from oil sales, and by the end of March, this windfall could grow to $5 billion.

According to CNBC, as of March 12, there are roughly 124 million barrels of Russian crude in transit at sea globally, equivalent to about 5-6 days of supply. It remains unclear exactly how much additional oil this move will release, but allowing more Russian oil to flow into the market could partially plug the potential supply gap and alleviate market panic over short-term shortages. However, the effectiveness of this policy has clear limitations. First, Russian oil never completely exited the market; it has been flowing to Asian countries via discounted sales and a shadow fleet, so the actual incremental supply from easing sanctions may be smaller than imagined. Second, even if Russian supply increases, it cannot fully offset the supply risks in the Middle East, particularly if the conflict continues to impact the Strait of Hormuz and potentially endangers critical waterways like the Red Sea. With tens of millions of barrels of oil transport affected daily worldwide, Russian supply alone is insufficient to fill such a massive void.

Conclusion

Summary of the Three Major Agencies’ Monthly Reports

In their latest monthly reports, the three major agencies generally agree on the short-term trajectory of oil prices, recognizing that the Middle East conflict and shipping disruptions in the Strait of Hormuz will create clear supply pressure. However, their supply and demand expectations are starkly divergent. Despite the Middle East conflict triggering a massive energy supply disruption in the Persian Gulf, OPEC's outlook remains largely consistent with last month; it maintains a relatively optimistic and stable stance on the macroeconomic and demand outlook, keeping its supply/demand growth and global economic growth forecasts unchanged, while noting that global refining margins exhibit regional divergence. The EIA believes that shipping disruptions will keep Brent crude above $95/barrel for the next few months, but as shipping recovers and US supply increases, prices may fall back to around $70 by late 2026. At the same time, high oil prices will stimulate an increase in US shale oil and associated natural gas production. The IEA's assessment is much more pessimistic, stating that the Middle East conflict has drastically slashed Persian Gulf supply and dragged down global supply growth; consequently, it downgraded its 2026 supply and demand growth forecasts. It also highlighted that refining and transport disruptions are exacerbating market tightness and announced plans to release 400 million barrels of strategic reserves to stabilize the market. Overall, all three agencies agree that short-term oil prices are supported by geopolitical shocks, but future market balance will depend on the speed at which Strait of Hormuz shipping recovers and whether US and other non-OPEC+ production growth can fill the Middle East supply gap.

Short-Term Oil Market Outlook

Over the past two weeks, oil price movements have been entirely dictated by geopolitical risks, primarily due to the ongoing expansion of US and Israeli military operations against Iran, with no signs of de-escalation in sight. The de facto blockade of the Strait of Hormuz and the attack-induced production cuts or shutdowns of multinational energy infrastructure have sparked extreme market anxiety over supply chain disruptions, pushing both Brent and WTI crude to multi-year highs. Crude inventory data shows that crude is accumulating, refined product drawdowns are beating expectations, and refinery capacity utilization has rebounded to 90.8%, indicating that end demand still possesses a degree of resilience. However, market reaction to this data has been almost entirely eclipsed by the US-Iran conflict, and it is expected that the market will not heavily price in crude inventory data in the near term. The current focus is centered on the conflict's impact on the crude market and the macroeconomy, which hinges not only on the intensity of military strikes and damage to energy facilities but, crucially, on the duration of the shipping disruption in the Strait of Hormuz. When the war will end, when supply and transport disruptions will lift, how long actual capacity recovery will take, and the status of insurance mechanisms and shipping protection will be the market's paramount concerns moving forward. In the medium to long term, because global supply remains relatively ample—buffered by sustained high US shale output and potential non-OPEC+ capacity—the market retains some fundamental cushion. If crude oil rises by a sustained $10/barrel, it is estimated to push global CPI up by roughly 0.3% - 0.4%. High oil prices will drive up service sector and transportation costs; imported inflation will ultimately transmit to end-consumer goods via transport and chemical raw material costs, dashing hopes for cooling inflation. With high oil prices and production costs rising in tandem, global central banks' room for interest rate adjustments is severely squeezed. As long as cost-side pressure persists, the cost of capital will fundamentally suppress capital expenditure growth in the global real economy.