Global oil benchmarks posted massive weekly gains, as the market abandoned hopes for a swift resolution, pivoting toward a prolonged standoff that is squeezing global inventories at an alarming rate.
West Texas Intermediate closed Friday at $94.88/bbl, up from $85.57/bbl the previous week, while Brent futures settled higher at $105.98/bbl, up from $91.78/bbl a week earlier.
Brent rose over 17% and WTI gained over 13% on a weekly basis.
The oil market experienced a volatile week, beginning with a relief rally and ending with a significant geopolitical risk premium as tensions in the Middle East intensified.
SEB analysts said that Brent crude rose about $9/bbl this week, reflecting a stark shift in sentiment from "a deal is around the corner" to "this will take longer than expected."
They warned that every week of delay beyond the May 1 deadline theoretically adds $5/bbl to the rest-of-year average.
Optimism evaporated by midweek following the collapse of fresh peace talks and a series of maritime escalations.
By Wednesday and Thursday, Iran's Islamic Revolutionary Guard Corps released footage of commandos seizing multiple foreign container ships, while the US military retaliated by interdicting a tanker suspected of smuggling Iranian crude in the Indian Ocean.
However, reports of Iranian Foreign Minister Abbas Araghchi's visit to Pakistan on Friday briefly triggered a 1% slide in WTI prices.
"Embarking on timely tour of Islamabad, Muscat, and Moscow. Purpose of my visits is to closely coordinate with our partners on bilateral matters and consult on regional developments," Araghchi said in a social media post on X.
However, Esmaeil Baqaei, Head of the Center for Public Diplomacy and Spokesperson for Iran's Ministry of Foreign Affairs, posted on X that the visit to Islamabad, Pakistan, was official. "FM Araghchi will be meeting with Pakistani high-level officials in concert with their ongoing mediation & good offices for ending American-imposed war of aggression and the restitution of peace in our region," Baqaei posted.
"No meeting is planned to take place between Iran and the US. Iran's observations would be conveyed to Pakistan," Baqaei said.
Analysts said that the scale of the crisis is unprecedented, with global supply disruptions widening from 9.1 million barrels per day in March to 13.7 mmb/d in April.
With global inventories drawing down by 100 million barrels per week, a mid-May reopening could floor Brent at $100/bbl, while a delay into June or July would drive prices meaningfully higher, analysts noted.
J.P. Morgan analysts report that the world's spare capacity concentrated in Saudi Arabia and the UAE is effectively cut off, stripping the market of its traditional stabilization mechanism.
Asian refiners face steep throughput drops as regional crude imports hit a 10-year low, according to a Reuters report.
HFI Research strategists suggest the structural damage to the oil market means it "will never be the same again."
On the supply front, US crude stockpiles rose by 1.9 mmbbls to 465.7 mmbbls in the week ended April 17, the Energy Information Administration said in its weekly report on Wednesday.
Crude inventories are now about 3% above the five-year average for this time of year, the EIA said.
Money managers in the WTI crude futures and options markets maintained their net long positions in the week ended April 21, according to the Commodity Futures Trading Commission's latest Commitments of Traders report released Friday.
The data showed that money managers reported 220,477 long positions, down 5,673 from April 14, while short positions were down 4,830 to 77,076.
The US oil rig count dropped by three from 410 the previous week to 407 in the week ending April 24, according to data from Baker Hughes (BKR) released Friday. The US had 475 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 one to 674 from 673 the previous week.