Key Highlights
- Petroleum markets recovered Thursday following Wednesday’s sharp 5.6% decline
- President Trump indicated negotiations with Iran are entering “final stages” while cautioning about possible military action
- Tehran established a new “Persian Gulf Strait Authority” to regulate Hormuz shipping
- U.S. crude stockpiles dropped 7.9 million barrels last week, significantly exceeding the 2.9 million barrel forecast
- Complete restoration of oil transport through Hormuz unlikely before late 2027
Petroleum markets bounced back Thursday following a significant downturn, as uncertainty surrounding U.S.-Iran diplomatic efforts continued to influence trader sentiment.
Brent crude approached $106 per barrel after experiencing a 5.6% decline Wednesday. West Texas Intermediate traded above $99. These fluctuations came amid contradictory messaging from both American and Iranian officials.
President Trump informed journalists that negotiations with Iran have entered their “final stages.” However, he emphasized that Washington remains prepared for military intervention should diplomatic efforts fail, describing the current circumstances as “right on the borderline.”
The President indicated he could allow “a few days” before pursuing additional measures.
Tehran’s Response and Hormuz Developments
Iranian officials confirmed they are examining the most recent American proposal in response to Tehran’s 14-point framework for peace. Semi-official Iranian news outlets report no formal reply has been issued.
Tehran cautioned that any renewed American or Israeli aggression would provoke countermeasures extending beyond regional boundaries.
Iran introduced a new “Persian Gulf Strait Authority” this week designed to oversee maritime movement through the Strait of Hormuz. The nation had previously signaled intentions to impose fees on vessels navigating the passage.
The strait continues to experience severe disruption. Although two Chinese oil tankers managed to transit the waterway Wednesday, overall traffic remains substantially below pre-conflict volumes.
The Strait of Hormuz accounts for approximately 20% of worldwide petroleum supply. Abu Dhabi National Oil CEO Sultan Al Jaber stated Wednesday that even with an immediate cessation of hostilities, Middle Eastern oil distribution would not reach full capacity until late 2027. He characterized the closure as the most extreme supply interruption in recorded history.
Sharp U.S. Stock Decline Intensifies Market Dynamics
Freshly released figures Wednesday revealed a substantial decrease in American crude reserves. Inventories declined 7.9 million barrels during the week concluding May 15, considerably surpassing the anticipated reduction of 2.9 million barrels.
The drawdown resulted from elevated U.S. petroleum exports as Washington increased crude shipments to nations seeking alternatives to Middle Eastern supplies.
Gasoline reserves decreased 1.5 million barrels, below the projected 2.1 million barrel withdrawal. The more modest reduction sparked concerns regarding weakening fuel consumption as pump prices escalate.
Goldman Sachs reported that worldwide inventories of crude oil and refined products are being depleted at an unprecedented rate this month.
Rabobank analysts emphasized that even a diplomatic breakthrough would not yield immediate market relief. “It takes up to 55 days to get oil from the Persian Gulf to its destination,” explained Joe DeLaura, global energy strategist at Rabobank.
Oil prices remain elevated more than 40% compared to levels when hostilities commenced in late February.
Three oil supertankers made attempts to navigate the Hormuz strait recently, representing the latest indication of marginally increased traffic. Iranian authorities claimed 26 vessels passed within 24 hours, though independent ship-tracking systems suggest lower figures.
