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EMEA Oil Update: Crude Mixed on Supply Fears After US Rebuts Iran Proposal

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EMEA crude futures diverged in after-hours trading on Monday as supply concerns intensified amid reports that the US views the recent Iranian peace proposal as insufficient, amid the International Energy Agency's warning that commercial oil inventories are depleting rapidly.

Brent crude futures rose by 1.35% to $110.74 per barrel, while Murban oil futures were down 1.57% to $106.30/bbl.

"Oil rose for a third consecutive session as President Trump intensified pressure on Iran to reach a deal to end the ongoing conflict and reopen the Strait of Hormuz," Soojin Kim, research analyst at MUFG, said.

The White House reportedly said a 14-point proposal delivered by Iran via Pakistani mediators on Sunday lacked meaningful improvement, failing to offer detailed commitments on the surrender of the country's stockpile of enriched uranium and the suspension of further enrichment.

Over the weekend, President Trump warned in a social media post that "for Iran, the clock is ticking, and they better get moving, fast, or there won't be anything left of them," hours after drone attacks at a nuclear power plant in the UAE.

Saudi Arabia said it intercepted and destroyed three drones that entered its airspace on Sunday from Iraq.

However, Iranian officials reportedly claimed that the US had offered a temporary reprieve to oil sanctions, one of the key demands Tehran has been seeking. Iran insists that the removal of all sanctions against the country must be part of the US commitments.

"The US and Iran remained far apart on a deal to end weeks of war and reopen the crucial Strait of Hormuz, with President Trump saying the clock is ticking for Iran," Saxo Bank strategists said in a note on Monday.

On the supply front, the IEA said in its latest monthly update that global oil inventories are depleting at a record pace as the Strait of Hormuz remains closed.

Fatih Birol, the IEA executive director, said on Monday that commercial oil inventories were depleting rapidly, with only a few weeks' worth left due to the ongoing Middle East conflict and the closure of the Hormuz.

Birol, who is participating in the Group of Seven finance leaders meeting in Paris, told reporters that the release of strategic oil reserves had added 2.5 million barrels of oil per day to the market, but said these reserves "are not endless."

Meanwhile, the US is set to extend a sanctions waiver allowing purchases of Russian seaborne oil for another 30 days on Monday to support vulnerable countries while the US works on issuing more specific licenses where required.

The measure is intended to help stabilize physical crude markets and ensure oil supplies continue to reach countries facing acute energy security risks, Treasury Secretary Scott Bessent said in a social media post.

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Oil & Energy

Weekly Crude Benchmarks Surge on Hormuz Disruptions, Geopolitical Gridlock

Oil benchmarks rose over the week as an escalating geopolitical gridlock and severe maritime security threats in the Middle East overrode short-lived diplomatic optimism.West Texas Intermediate settled at $105.66 per barrel, up from $94.68/bbl the previous week, while Brent closed at $109.18/bbl, up from $100.14/bbl a week earlier.WTI registered weekly gains of 10.48%, while Brent was up 7.79%.The upward weekly trajectory was fueled by the prolongation of an effective closure at the crucial Strait of Hormuz, which eroded global safety buffers and triggered supply anxieties that overshadowed high-level discussions between US President Donald Trump and Chinese President Xi Jinping in Beijing, analysts noted.Trump departed Beijing on Friday after meeting with President Xi during a two-day diplomatic visit to China without securing a breakthrough to end the blockade of the Strait of Hormuz.During a press briefing on Air Force One, Trump said he discussed lifting sanctions on Chinese companies purchasing Iranian oil with Chinese President Xi Jinping."... I'm going to make a decision over the next few days," Trump said about potentially lifting sanctions.The US recently sanctioned several Chinese refiners tied to Iran's oil trade as Washington expanded economic pressure on Tehran, while China has remained the largest buyer of Iranian crude shipments.China wants the Strait of Hormuz reopened as energy flows through the route remain heavily disrupted following recent tensions with Iran. "He'd like to see it opened up," Trump said.Wang Yi, China's Foreign Minister, said Friday that China wants the Strait of Hormuz reopened quickly while supporting efforts to maintain the ceasefire, China's state-owned media outlet Xinhua reported.China believes a permanent and comprehensive ceasefire offers the long-term solution to issues surrounding the Strait of Hormuz, Wang said during a press briefing in Beijing.Wang also said China encourages the US and Iran to continue resolving disputes, including nuclear-related issues, through negotiations.The week began with a sharp rally after President Trump rejected an Iranian peace counteroffer, labeling it "totally unacceptable" and declaring the existing ceasefire to be on "massive life support."This diplomatic collapse dashed market hopes for a quick fix, while momentum amplified as Washington levied new sanctions against an Islamic Revolutionary Guard Corps oil-shipping network accused of using front companies across Oman, Hong Kong, and the UAE to bypass restrictions.The physical severity of the 10-week blockade was laid bare by mid-week industry reports.The International Energy Agency's May oil market report confirmed that an unprecedented 14.4 million barrels per day of Gulf production was shut in, while Bloomberg satellite imagery showed Iranian export terminals grinding to a virtual standstill.ANZ analysts warned that if the chokepoint remains closed, the second quarter of 2026 will suffer the largest quarterly crude inventory drawdown in history at 6.5 mb/d.Crude prices experienced a temporary mid-week reprieve, pausing on Wednesday and retreating on Thursday following reports that Iran had allowed a limited convoy of about 30 vessels to cross the strategic chokepoint.This brief easing coincided with the Trump-Xi summit, though President Trump downplayed any imminent diplomatic breakthrough regarding the energy crisis.Bearish demand revisions also capped gains, as OPEC downgraded its 2026 global demand growth forecast to 1.2 mb/d and the IEA revised its outlook to a demand contraction of 420,000 b/d.Furthermore, OPEC data revealed that its April production had plummeted by 1.73 mb/d to 18.98 mb/d, a steep decline that reflected the final month of the UAE's membership in the producer group.Meanwhile, the Energy Information Administration released its May Short-Term Energy Outlook earlier this week. The EIA slightly lowered its Brent crude price outlook for 2026 while raising its 2027 forecast, reflecting a shift in the expected supply-demand balance.Near-term prices were supported by tighter market conditions driven by supply disruptions and lower inventories, while expectations of weaker demand growth and improving supply conditions shaped the medium-term outlook. The agency still expects prices to ease into 2027 as markets normalize.Disruptions in the Strait of Hormuz are expected to keep global oil markets tight after 10.5 mmb/d of Middle East crude output went offline in April, the EIA said.Brent crude is seen averaging about $106/bbl in Q2 2026 as global inventories fall sharply, according to the EIA STEO. The agency expects prices to later ease to about $89/bbl in Q4 2026 and $79/bbl in 2027 as Middle East supply gradually recovers.Crude and petroleum product flows through the Strait of Hormuz fell to 14.6 mmb/d in Q1, down from 20.7 mmb/d in Q4 2025 and 20.4 mmb/d in Q1 2025, according to the EIA's Global Energy Security data released Wednesday.However, the market's mid-week pullback was abruptly reversed on Friday as physical shipping threats flared up once again.Sentiment soured rapidly following reports from the United Kingdom Maritime Trade Operations that a commercial vessel was boarded and seized by unauthorized personnel at the entrance of the Strait of Hormuz and forced into Iranian waters.This incident closely followed the confirmed sinking of an Indian merchant ship in the nearby Gulf of Oman.Compounding the physical supply friction, the US Central Command said in an X post on Friday, "As of today, 75 commercial vessels have been redirected and 4 have been disabled to ensure compliance."On the supply front, US crude oil inventories decreased by 4.3 million barrels to 452.9 mmbbls in the week ended May 8, the EIA said in its weekly report on Wednesday.Crude inventories are now about 0.3% above the five-year average for this time of year, the EIA said.The US oil rig count rose by five from 410 the previous week to 415, in the week ending May 15, according to data from Baker Hughes (BKR) released Friday. That compares with 465 oil rigs in operation a year earlier.The consolidated North American oil and gas rig count, a key early indicator of future production levels, rose by three to 675 from 672 the previous week.Money managers in the WTI crude futures and options markets maintained their net long positions in the week ended May 12, according to the Commodity Futures Trading Commission's latest Commitments of Traders report released on Friday.The data showed that money managers reported 214,128 long positions, up 89 from May 5, while short positions increased by 2,462 to 82,083.

$BKR
Oil & Energy

US Oil Update: Crude Jumps as Trump-Xi Meeting Fails to Ease Supply Fears

Crude oil futures settled higher in after-hours trading on Friday after President Trump departed Beijing without securing a breakthrough to end the blockade of the Strait of Hormuz.Front-month West Texas Intermediate crude futures rose by 4.44% to $105.66 per barrel, while Brent futures gained 3.55% to $109.47/bbl.On Friday, Trump reportedly said he didn't push President Xi to pressure Iran to open the Hormuz, offering no sign of a breakthrough in the standoff over the key chokepoint. China is the top buyer of Iranian crude.The US President reportedly said that he is losing patience with Iran. "I am not going to be much more patient. They should make a deal," Trump was quoted as saying."President Trump said he does not need Hormuz reopened, although discussions with Chinese President Xi included the ongoing conflict and energy security concerns," Soojin Kim, research analyst at MUFG, said.US Energy Secretary Chris Wright said China is set to increase its crude oil imports from the US as the world's two largest economies deepen energy ties amid significant global supply disruptions, according to media reports."There's a natural energy trade there," Wright reportedly said, noting that the US is the world's largest producer while China remains the top importer. "I suspect we'll see a growth in their oil imports from the United States."However, Iranian Foreign Minister Abbas Araghchi said on Friday that Tehran has "no trust" in the US and will negotiate only with Washington if it is serious. Araqchi said that Iran is prepared to return to fighting but also to pursue diplomatic solutions."Currently, trust is the most important issue. We cannot trust the Americans at all. As a result, everything has to be precise, and everything has to be clearly defined before we can reach an agreement," Araghchi told reporters in New Delhi on Friday.Meanwhile, Chinese FM Wang Yi says Beijing believes a solution to issues in the Strait of Hormuz "lies in achieving a permanent and comprehensive ceasefire" between the US and Iran, adding that "force cannot solve problems.""China is likely to support a gradual reopening of the Strait of Hormuz, but on terms that preserve its flexibility," Kpler strategists said, adding that the closure threatens global growth, Asian energy markets and the export demand underpinning China's economy.On the supply front, the Middle East conflict has driven global oil inventories down at a record pace, and the market will remain "severely undersupplied" until October even if hostilities end next month, the International Energy Agency said on Wednesday.The IEA said that global observed oil inventories dropped by 250 million barrels in March and April, or at a rate of about 4 million barrels per day.OPEC also said on Wednesday that crude production among member states fell further in April and is down more than 30% since the onset of the conflict in late February. The producer group said production fell by 1.7 million b/d in April after output plunged by 7.9 million b/d in March.

Oil & Energy

Wright Sees Hormuz Reopening This Summer, US Gas Exports Rising

US Energy Secretary Chris Wright said Friday that traffic through the Strait of Hormuz could resume this summer if negotiations with Iran progress."Traffic will be flowing through the Straits of Hormuz," Wright said during a CNBC interview, reposted by the Department of Energy.He added that shipments could resume "sometime this summer or later.""If Iran continues to hold the world economy hostage, the US military will force the reopening of the Straits of Hormuz," Wright said, while describing diplomacy as the preferred solution."There is confusion. There is faction among the regime," Wright said about Iran's leadership, adding that internal divisions could eventually result in regime change.Referring to disruptions linked to reduced flows through the Strait of Hormuz, Wright said the market had lost about 10 billion cubic feet per day of gas exports for now.However, he added that the US is still adding about 2.5 Bcf/d of new export capacity this year."We're continuing to ramp up US natural gas exports," Wright said. "It'll be a record again this year, with a record last year."Wright said the US currently exports about 20 Bcf/d of natural gas, roughly double the volumes exported by the next-largest global suppliers.Wright said the US had sharply reduced the number of drilling rigs needed to expand natural gas production and had shifted from being the world's largest importer to the world's largest exporter.When asked whether global oil production could rise significantly over the next several years through increased output from countries such as Venezuela and the UAE, Wright said it would.Wright added that the rising global living standards will continue increasing long-term demand for both oil and natural gas across international energy markets.