Price Trend Summary

• In the early part of the first week, US-Iran peace talks stalled again. Trump rejected Iran's counter-proposal and called the ceasefire agreement "on life support," with rising safe-haven sentiment driving oil prices upward; at the same time, the EIA's May "Short-Term Energy Outlook" estimated that global oil inventories would decrease by an average of 8.5 million barrels per day in 2Q26. Saudi Aramco CEO Amin Nasser also warned that even if the Strait resumes navigation, supply normalization might be delayed until 2027, reinforcing the market's expectation of tight supply and driving oil prices higher.
  In the mid-week, the market experienced short-term consolidation affected by expectations of the Trump-Xi Beijing Summit and OPEC's downward revision of its 2026 demand growth forecast. However, the IEA believed that even if the conflict ends in June, the market may still be undersupplied until the end of the third quarter. Coupled with US EIA inventory data showing a massive, far-worse-than-expected crude inventory draw of 4.3 million barrels, and Trump's tough warning to Iran that they would face "obliteration" if an agreement is not reached, the decline in oil prices was limited.
  In the latter part of the week, the market focused once again on the blocked Strait, stalled peace talks, and rapid inventory depletion; Trump stated he was "losing patience" with Iran, while Iran indicated a lack of trust in the US and reserved military options, dampening market hopes for a quick ceasefire. Although shipping data showed a slight improvement in passage, it remained far below normal levels. The market remained continuously concerned that if the Strait is blocked long-term, even if strategic reserve releases and demand suppression can temporarily stabilize the market, there could still be risks of more severe crude supply tightening and refined product shortages down the line; furthermore, Ukraine's continued attacks on Russian refining facilities further deepened global energy supply concerns, driving a significant late-week rally in oil prices.
• In the early part of the second week, oil prices fell following news that the US was only an hour away from striking Iran, but after dissuasion from other Middle Eastern countries, Trump announced on Monday the cancellation of the planned military strike on Iran to allow more room for diplomatic negotiations. However, because the blockade of the Strait was not lifted and negotiations yielded no results, oil prices were supported and maintained a high-level consolidation.
  In the mid-week, Trump claimed that Iran negotiations were in their "final stages." This triggered strong market expectations for the imminent reopening of Hormuz. Additionally, the US drew nearly 10 million barrels from the SPR in a single week during this period, setting a historical record for the largest single-week release. This partially alleviated the market's panic over supply shortages in the short term, providing extra support for the decline. Oil prices subsequently experienced their largest single-day drop of the week.
  In the latter part of the week, a Reuters report indicated that Iran stated its enriched uranium stockpile must remain domestically and not be moved abroad, a move seen as a tough signal sent to the nuclear negotiations, which drove oil prices up by more than 3% during the session. Furthermore, market sources noted that Iran is discussing with Oman the establishment of a permanent transit toll system to institutionalize its control over shipping in the Strait of Hormuz. On the other hand, the US stated that US-Iran mediation talks had made "some progress," while Iran stated it was evaluating the latest US proposal passed through Pakistan. Against this backdrop, although Brent futures briefly returned above $105 per barrel, they still posted a cumulative weekly decline of over 6%.

Agency Monthly Reports:

This Month's 3 Agency Supply and Demand Forecasts:

EIA

• Global Oil Production: The EIA assesses that Iraq, Saudi Arabia, Kuwait, the UAE, Qatar, and Bahrain shut in approximately 10.5 million barrels/day of crude production capacity in April. This outlook assumes the Strait of Hormuz will remain closed until late May, with shipping volumes beginning to recover in June. Due to the massive drop in oil inventories caused by production disruptions, particularly in May and June, downward pressure on oil prices will be limited even if oil transit through the Strait increases. Assuming a later reopening of the Strait and a longer recovery period for shut-in oil, global oil inventories in 2026 are revised upward from last month's forecast of a 300,000 barrels/day decrease to a 2.6 million barrels/day decrease.

Note: The blank spaces on the right only forecast total production outages for the coming months.

• Crude Oil Price Forecast: Due to the physical closure of the Strait of Hormuz leading to tightened global oil supply, Brent crude spot prices surged significantly in April, averaging $117 per barrel for the month. Global oil inventories are expected to fall by an average of 8.5 million barrels/day in 2Q26, which will keep Brent crude prices at around $106 per barrel in May and June. As Middle Eastern oil production increases, crude oil prices are expected to decline, falling to $89 per barrel in 4Q26 and $79 per barrel in 2027.
• Supply Side: Oil production in parts of the Middle East will remain disrupted during this period, leading to production outages. It is expected that the 2026 supply growth will be revised down from the previously forecast -2 million barrels/day to -4.8 million barrels/day.
• Demand Side: Due to high oil prices slowing global oil demand growth, the 2026 demand growth is expected to be revised down from the previously forecast 600,000 barrels/day to 200,000 barrels/day, primarily due to reduced demand in the Asian region.
• OPEC: This Short-Term Energy Outlook incorporates the impact of the UAE announcing its exit from OPEC. OPEC production data in this outlook excludes UAE data. OPEC's spare capacity in 2027 is expected to be revised down from the previously forecast 3.8 million barrels/day to an average of 2.5 million barrels/day.

IEA

• Demand Side: Global oil demand growth for 2026 is revised down from last month's 80,000 barrels/day decrease to a 420,000 barrels/day decrease, dropping to 104 million barrels/day. The shock is most pronounced in 2Q26, with demand falling 2.45 million barrels/day year-on-year. The currently most affected sectors are petrochemicals and aviation, and as oil prices rise, the global economy weakens, and energy-saving measures expand, transportation fuel demand will be further suppressed.
• Supply Side: Global oil supply fell by another 1.8 million barrels/day in April to 95.1 million barrels/day, bringing the cumulative production cut since February to 12.8 million barrels/day. Affected by the closure of the Strait of Hormuz, Persian Gulf oil producers' output is 14.4 million barrels/day below pre-war levels. If the Strait gradually resumes passage from June, the IEA estimates that average full-year supply in 2026 will still decrease by 3.9 million barrels/day to 102.2 million barrels/day.
• Refining Side: Global refinery crude throughput is expected to plunge by 4.5 million barrels/day in 2Q26 to 78.7 million barrels/day, and average a 1.6 million barrels/day decrease for the full year to 82.3 million barrels/day. Damaged infrastructure, export restrictions, and a lack of feedstock are forcing refineries to lower utilization rates. However, refining crack spreads have hit historic highs, keeping refining margins at extremely high levels.
• Global oil inventories decreased by 129 million barrels in March and another 117 million barrels in April. The combined two-month drop is approximately 250 million barrels, equivalent to a daily reduction of 4 million barrels. Onshore inventories saw a massive drop of 170 million barrels in the single month of April, with OECD countries decreasing by 146 million barrels, showing that nations are releasing large amounts of commercial and strategic reserves to bridge the supply gap.
• IEA Viewpoint: Because the pre-war market was originally in oversupply, coupled with Saudi Arabia and the UAE exporting via ports outside the Strait, countries releasing commercial and strategic oil reserves, and the US, Brazil, Canada, Kazakhstan, Venezuela, and Russia expanding exports, the actual supply-demand gap is smaller than its surface scale. On the other hand, major Asian importers have sharply slashed crude purchases, and global refining runs have significantly declined. Although this eases crude market pressure in the short term, it leads to tight diesel and jet fuel supplies and causes petrochemical and aviation demand to drop significantly. The IEA estimates that global oil demand will turn to negative growth in 2026. If the Strait gradually resumes passage from 3Q26, demand may return to growth by the end of the year, but the speed of supply recovery is expected to be slower. The IEA believes the global oil market will remain in an undersupplied state for the first three quarters of 2026, with an opportunity to gradually balance only by 4Q26. Continuously rapid inventory declines also mean oil prices will remain highly volatile before the peak summer season.

OPEC

• Global economic growth forecasts remain unchanged from last month's assessment at 3.1% for 2026 and 3.2% for 2027; within this, 2026 economic growth in the Eurozone is revised down slightly to 1.1%, Japan's 2026 economic growth is revised down slightly to 0.8%, and China's 2026 economic growth is revised up slightly to 4.6%.
• Demand Side: Global oil demand is estimated to grow by 1.2 million barrels/day in 2026, revised down by about 200,000 barrels/day from last month's assessment. In 2027, global oil demand is estimated to grow by about 1.5 million barrels/day, revised up by about 200,000 barrels/day from last month's assessment.
• Supply Side: Non-DoC liquids production will grow year-on-year by about 600,000 barrels/day in 2026. In 2027, non-DoC liquids production is similarly estimated to grow by about 600,000 barrels/day, remaining unchanged from last month's assessment. NGLs and unconventional liquids from DoC countries are expected to grow year-on-year by 100,000 barrels/day in 2026, averaging about 8.8 million barrels/day; the year-on-year increase for 2027 is about 100,000 barrels/day, averaging 8.9 million barrels/day, remaining unchanged from last month's assessment. Based on available data, crude oil production from DoC countries in April fell sharply by 1.74 million barrels/day from the previous month, averaging roughly 33.19 million barrels/day.
• Crude and Refined Products Trade: US crude imports fell to a 5-month low in April, averaging 5.8 million barrels/day, while crude exports hit a historic high, estimated at 5.3 million barrels/day, primarily due to increased volumes flowing to Japan and South Korea. Product exports averaged 7.7 million barrels/day in April, hitting a record high driven largely by a strong increase in fuel oil demand.
• Commercial Inventory Changes: March 2026 data shows that OECD commercial crude inventories fell by 21.6 million barrels from the previous month to 2,774 million barrels.
  Overall Inventory Comparison: This is 25 million barrels higher than the same period last year, and 8.3 million barrels higher than the latest five-year average, but 139.9 million barrels below the 2015–2019 average.
  Crude and Product Inventories: Crude inventories increased by 26.8 million barrels (totaling 1,348 million barrels); product inventories decreased by 48.4 million barrels from the previous month (totaling 1,426 million barrels).
  Forward Cover: OECD commercial inventories in March fell by 1 day to 61 days, which is 0.2 days below the five-year average.

US Crude Data Update

Crude and gasoline inventories continue to draw down, distillates build slightly but overall inventories remain below the 5-year average

According to the EIA's "Weekly Petroleum Status Report" and Baker Hughes data for two consecutive weeks (weeks ending 5/8 and 5/15), the US oil market continues to show a trend of rapid crude destocking, tight refined products, and a slow recovery in refinery capacity utilization rates. Crude inventories fell continuously and significantly, first dropping by about 4.3 million barrels to 452.9 million barrels, and then dropping heavily by another 7.86 million barrels to 445 million barrels the following week, both far exceeding market expectations; if the SPR is included, the total crude inventory drop in the second week reached about 17.8 million barrels, of which the SPR released about 9.9 million barrels in a single week—a historical record. The core driver for crude destocking comes from robust exports. US crude exports continued to rise, increasing from about 5.49 million barrels/day to 5.6 million barrels/day, which is roughly 47% higher than the five-year average of 3.79 million barrels/day, reflecting Europe and Asia's increased reliance on US crude amid the Iran conflict and Strait of Hormuz risks; at the same time, falling imports and refineries maintaining high loads also provided support. Refinery utilization stayed at a high of about 91.6%–91.7%, indicating that refineries have essentially completed spring maintenance and are pre-stocking for Memorial Day and the peak summer driving season. On the refined products front, gasoline inventories fell continuously, with a combined two-week draw of about 5.65 million barrels down to 214.2 million barrels. Driving activity and transportation fuel consumption remain resilient, and end-consumer demand is rising moderately (implied gasoline demand is about 8.77 million barrels/day), showing that while retail fuel prices are in a relatively high range, end-demand has not been noticeably destroyed, and it continues to destock due to exports and seasonal restocking. Distillate inventories saw a continuous small build to about 103 million barrels, primarily reflecting high refinery runs driving increased middle distillate supply, but inventories are still nearly 10% below the five-year average, indicating that supply remains practically tight. On the supply side, the US oil rig count increased consecutively from 410 to 425, showing that high oil prices are indeed stimulating upstream operators to expand drilling activities. However, looking at the historical rig count over the past five years, current additions are still selective production increases and will not form massive supply growth in the short term.

Important News & Current Events

Modi Agrees to Establish Strategic Crude and Natural Gas Reserves with the UAE

India will cooperate with the UAE to expand strategic crude oil and natural gas reserves in response to supply shocks triggered by the Iran war and the near-closure of the Strait of Hormuz. For India, the world's third-largest oil consumer, this move aims to enhance energy security and reduce vulnerability to the single route of the Middle East. The Abu Dhabi National Oil Company (ADNOC) is expected to significantly increase its crude oil storage in India to 30 million barrels. Both parties are simultaneously planning to establish strategic natural gas reserves in India and studying the creation of additional oil storage capacity at the port of Fujairah along the Gulf of Oman to reduce reliance on the Strait channel. India's energy exposure is extremely high; roughly 50% of its crude, 67% of its LNG, and most of its LPG rely on Middle Eastern supply; the recent supply crisis exposed India's pain points of insufficient crude inventories and a lack of natural gas reserves, even leading to industrial fuel rationing and government energy-saving measures. India's existing strategic reserve operator, ISPRL, has built about 39 million barrels of strategic crude inventory and is expanding an additional 48 million barrels of capacity. The Indian government also continues to encourage international oil companies and traders to use domestic storage facilities to increase domestic inventory levels without direct government oil purchases.

For the UAE, this cooperation is equally strategically valuable. After the blockage of the Strait of Hormuz severely hit its exports, the UAE is accelerating the development of the Fujairah alternative export system; officials stated that a new oil pipeline is expected to be commissioned next year, which could double overseas export capacity via Fujairah. Additionally, after exiting OPEC, the UAE is no longer bound by quotas and intends to actively expand its global market share. Beyond crude oil cooperation, ADNOC and the Indian Oil Corporation will also explore expanding LPG supply and trade, building on a long-term contract that has existed between the two parties since 2023.

Commentary: For India, its past reliance on just-in-time imports and a low-inventory model exposed significant risks under the Strait of Hormuz crisis. India's accelerated establishment of dual strategic reserves for crude and natural gas is essentially replicating the security architecture of energy importers like China and the US. For the UAE, this move is more about establishing a "de-Hormuzing" export network. Through Indian oil storage sites, the Port of Fujairah, and new pipeline layouts, the UAE is attempting to shift some export and inventory nodes out of the Persian Gulf bottleneck. If Middle East supply risks become long-term, the world may see more similar models in the future of consuming countries expanding inventories, producing countries diversifying export routes, and transnational sharing of reserve facilities. This will improve the resilience of the global energy system, but it also means that energy security costs, capital expenditures, and geopolitical competition will simultaneously rise.

US Secretary of State Says "Good News" May Be Announced, but Iran Calls Trump "Detached from Reality"

US Secretary of State Marco Rubio revealed during his visit to India that US-Iran negotiations have come close to reaching an interim agreement in the past 48 hours, and "good news" regarding the Strait of Hormuz is expected to be announced within the next few hours. Trump also stated earlier that a peace agreement among the US, Iran, and relevant countries has largely been completed, and news of the Strait of Hormuz reopening may be announced imminently. According to a negotiation framework reported by Axios, the potential agreement may include: extending the current ceasefire by 60 days, reopening the Strait of Hormuz, allowing Iran to resume partial oil exports, and subsequent ongoing negotiations on Iran's nuclear program. At the same time, the draft reportedly involves arrangements for the conflict between Israel and Hezbollah in Lebanon. However, Iran's attitude remains conservative. Iran's semi-official media Tasnim pointed out that the two sides still have differences on some terms, including core issues such as the unfreezing of overseas assets, oil sanctions waivers, nuclear enrichment activities, and uranium disposal, and Israel may also have reservations about the Lebanon ceasefire terms.

The Strait of Hormuz remains the core focus of the entire negotiation, and Gulf countries such as Saudi Arabia, Qatar, and the UAE are actively participating in mediation, hoping to gain more negotiation time. For Trump, high oil prices and rising domestic fuel costs in the US have created political pressure, which will be the main driving force pushing his negotiations, especially with mid-term elections approaching; but if he makes too many concessions to Iran, he may also face criticism from domestic hawkish camps, being viewed as making a strategic retreat.

Commentary: From current information, the true difficulties in the negotiations remain focused on the trade-offs regarding unblocking the Strait, lifting sanctions, and limiting nuclear activities. On the nuclear issue, Iran has not yet agreed to hand over its highly enriched uranium stockpile and believes the nuclear topic is not part of the phase-one core content; Iranian media points out that Tehran currently accepts no substantive nuclear restrictions, only that they may continue to be discussed during the future 60-day ceasefire, showing the nuclear issue remains at a principled negotiation stage. On the Strait, the US proposed extending the ceasefire by 60 days, reopening the Strait, stopping toll collections, and clearing mines, in exchange for the US lifting the port blockade, providing partial sanctions waivers, and resuming Iran's oil exports; however, Iran emphasized the Strait will not fully return to its pre-war state, will maintain sovereign control, and if the US does not fully lift the naval blockade within 30 days, Iran will not adjust current arrangements. Sanctions and asset issues have become the biggest obstacle: the US advocates only providing temporary sanctions waivers first, with the permanent lifting of sanctions and unfreezing of assets pending concrete concessions from Iran on nuclear and Strait issues; conversely, Iran demands the release of at least some practically usable frozen assets in the first phase, otherwise, it will not accept the agreement. The core interests of both sides are still not fully aligned. Furthermore, whether Israel and regional proxies are willing to simultaneously de-escalate will also affect the stability of the agreement. Therefore, even if good news such as a ceasefire extension or a partial reopening of the Strait appears in the short term, it more likely represents a transitional arrangement rather than a fundamental resolution of Middle East geopolitical risks. For the energy market, although volatility risks may decline, true structural normalization still depends on whether subsequent nuclear negotiations and regional security architectures can be continuously advanced, and should only be viewed under more optimistic circumstances once clear consensus is reached on all three divergences.

Conclusion

Summary of Agency Monthly Reports

The latest monthly reports from the three major agencies point broadly to the same conclusion: the global crude oil market in 2026 will continue to be dominated by the Strait of Hormuz crisis and Middle East supply disruptions, but differences remain in their judgments on the scale and duration of the supply-demand gap. The EIA adopts the tightest baseline scenario, assuming the Strait closure continues until late May and supply recovers slowly, drastically revising down 2026 global supply growth to -4.8 million barrels/day and demand growth to only +200,000 barrels/day, while estimating global inventories will decrease by an average of 8.5 million barrels/day in 2Q26, supporting Brent in the short term at around $106/barrel. The IEA believes that although the market remains undersupplied due to the Strait blockade, production cuts, and rapid inventory declines, the pre-war supply glut, alternative exports outside the Strait, global reserve releases, and demand destruction effects are partially offsetting the shock, estimating 2026 full-year supply will still decrease by 3.9 million on average, full-year global oil demand will turn to negative growth, and assuming a slow supply recovery, the market may only gradually rebalance by 4Q26. In contrast, OPEC maintains a more optimistic macroeconomic and demand outlook; although it slightly revised down 2026 demand growth, it still estimates global demand growth at about 1.2 million barrels/day, reflecting its confidence in emerging market demand resilience and supply adjustment capabilities. Overall, the three major agencies collectively confirm that global inventories are rapidly contracting and supply risks have not been resolved, but the market's medium-term trajectory will depend on the pace of the Strait's recovery, the speed of supply restoration, and the extent of demand destruction caused by high oil prices.

Short-Term Crude Market Summary

Over the past two weeks, although oil prices exhibited high-level volatility and Brent and WTI fell slightly, the core drivers of the market have not changed; the progress of US-Iran negotiations, passage status in the Strait of Hormuz, and the pace of global inventory depletion continue to dictate the price direction. On the one hand, the market fell rapidly multiple times on news of ceasefires, Strait reopenings, and negotiations nearing an agreement, while massive SPR releases by the US also briefly alleviated supply anxieties; on the other hand, the US and Iran still have clear divergences on key issues such as nuclear activity limitations, Strait control, sanctions lifting, and frozen assets, making the agreement more likely to remain a transitional arrangement rather than a full normalization. At the same time, massive continuous draws in US crude and gasoline inventories, high export levels, refineries operating at high loads, and accelerated strategic reserve building and de-Hormuzing layouts by countries like India and the UAE also show that the global energy market is continuously adjusting in response to long-term supply risks. Overall, while the short-term market may experience pullbacks due to improving negotiation news, oil prices will maintain a pattern of high volatility and strong support before the Strait risks, supply tightness, and low-inventory background are fundamentally resolved.