Oil & Energy
Weekly Crude Prices Decline as Iran Reopens Strait of Hormuz, Easing Risk Premium
Crude prices tumbled after Iran reopened the Strait of Hormuz, bolstering optimism that the US-Iran conflict will de-escalate and ease disruptions to global energy markets.West Texas Intermediate closed Friday at $85.57/bbl, down from $95.63/bbl the previous week, while Brent futures settled at $91.78/bbl, down from $94.36/bbl a week earlier.WTI futures plunged 13.2% over the week, while Brent prices declined 3.4%.The retreat follows the announcement by the US and Iran that the Strait of Hormuz would be open for the duration of a 10-day ceasefire between Israel and Hezbollah in Lebanon.On Friday, Iranian Foreign Minister Abbas Araghchi declared the Strait of Hormuz open to commercial shipping during the ceasefire period, easing concerns over potential disruptions to global oil flows."In line with the ceasefire in Lebanon, the passage for all commercial vessels through Strait of Hormuz is declared completely open for the remaining period of ceasefire, on the coordinated route as already announced by Ports and Maritime Organisation of the Islamic Rep. of Iran," Araghchi posted on X.Subsequently, US President Donald Trump posted on Truth Social on Friday that Iran had declared the Strait of Hormuz "fully open and ready for full passage," adding that the US blockade of Iranian ports is still in effect.Analysts, however, have cautioned against viewing this as a lasting de-escalation, citing the fragility of the ceasefire."The opening of Hormuz was made possible by a ceasefire between Israel and Lebanon. However, this can be only described as a temporary and tenuous agreement," said Viktor Shvets, head of Global Desk Strategy at Macquarie Capital.Five empty tankers have reportedly arrived at Iranian ports in the Arabian Gulf in recent days and begun loading crude oil, while Kpler said on Friday that early vessel movements, including those linked to Adnoc LNG operations near Das Island, pointed to a cautious return of activity."In the near term, it is more likely to improve logistics than create new supply," Claire Jungman, a Vortexa analyst, toldon Friday.She added that many barrels were delayed or queued rather than removed from the market, so reopening should help crude, liquefied petroleum gas, and liquefied natural gas cargoes resume movement.In a Friday note, Rystad Energy strategists said tanker network normalization could take 6-8 weeks, with insurers and shipowners needing 2-5 weeks to resume operations and upstream output recovering in another 2-6 weeks, largely occurring simultaneously.Commerzbank analysts said that while the war premium eased on Friday, the long-term outlook remains bullish as the world grapples with the loss of Middle Eastern infrastructure.The International Energy Agency confirmed a massive "Asian supply gap," reporting that zero new tankers were loaded in the Persian Gulf during the entire month of March.Meanwhile, North Sea crude prices declined by about $7 per barrel, while Brent plunged 13% to about $86/bbl after the update on the Strait of Hormuz reopening, according to a Bloomberg analysis on Friday.Key North Sea grades and US WTI Midland also declined $5-$7/bbl in a Platts pricing window run by S&P Global, reflecting a sharp shift in sentiment following the announcement, the Bloomberg analysis said.WTI Midland's premium over Dated Brent narrowed to $10.40/bbl, its lowest level this month and more than 50% below its April 14 peak, the analysis added.Brent prices were in backwardation relative to prompt physical North Sea barrels earlier this month. The new developments, however, reflect a drop in the prompt risk premium and physical differentials."Physical oil prices-prompt barrels rather than June futures-have fallen sharply from $144 on April 7 to around $116 today," J.P. Morgan analysts said.Meanwhile, International Energy Agency Chief Fatih Birol reportedly said that it will take two years to recover the energy output lost in the Middle East conflict.On the supply front, US crude stockpiles fell by 900,000 barrels to 463.8 mmbbls in the week ended April 10, the Energy Information Administration said in its weekly report on Wednesday.Crude inventories are now about 1% above the five-year average for this time of year, the EIA said.The US oil rig count dropped by one from 411 the previous week to 410 in the week ending April 17, according to data from Baker Hughes (BKR) released Friday. That compares with 473 oil rigs in operation a year earlier.The consolidated North American oil and gas rig count, a key early indicator of future production levels, dropped by seven to 673 from 680 the previous week.Money managers in the WTI crude futures and options markets maintained their net long positions in the week ended April 14, according to the Commodity Futures Trading Commission's latest Commitments of Traders report released Friday.The data showed that money managers reported 226,150 long positions, up 3,059 from April 7, while short positions were down 3,347 to 81,907.
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