The Week in Oil : Hormuz at Standstill Despite U.S.-Iran Cease-fire

By Giulia Petroni

Here's a look at what happened in oil markets in the week of April 6-10 and what the focus will be in the days to come.

OVERVIEW: Oil prices are on track for their steepest weekly percentage decline in nine months ahead of U.S.-Iran talks this weekend in Pakistan. In afternoon European trading, Brent crude for June delivery was at $96 a barrel, while West Texas Intermediate futures for May are at $98 a barrel.

MACRO: U.S. consumer price data--the first major inflation report since the Iran war began--came in at its hottest level in two years. Gasoline prices jumped 18.9%, while fuel oil surged by 44.2%. Market watchers say Friday's CPI report reinforced the Federal Reserve's decision to pause interest-rate changes at its meeting last month. Minutes from the Fed's March meeting, released on Wednesday, indicated that most officials now expect progress in bringing inflation down this year to be slower than previously anticipated.

GEOPOLITICAL RISKS: The two-week cease-fire agreement between Washington and Tehran this week triggered a drop in oil prices. Traders had initially expected the deal to boost shipping activity through the strategically vital Strait of Hormuz, but vessel traffic has so far remained at a standstill due to continued uncertainty regarding the safety of passage.

"News regarding tanker traffic in the coming days is likely to be more important for the oil market than fundamental data," said Carsten Fritsch from Commerzbank.

Iran's ability to influence access to the Strait of Hormuz is expected to leave a lasting imprint on global energy markets. Producers in the region might respond by boosting output capacity and developing alternative export routes to reduce reliance on the strait. The situation could also affect OPEC dynamics, potentially even prompting questions about the group's future, some analysts said.

SUPPLY AND DEMAND: The volume of crude and condensate sitting on water in the Persian Gulf remains little changed since the U.S. and Iran agreed to a two-week cease-fire, according to Kpler data. Fleet metrics show more than 130 million barrels across roughly 80 laden tankers as of Thursday.

Meanwhile, an Iranian attack on the East-West Pipeline--currently Saudi Arabia's primary export outlet--led to a loss of around 700,000 barrels a day in throughput. The pipeline, which connects Saudi Arabia's eastern oil fields to the Red Sea port of Yanbu, can move up to 7 million barrels a day of crude.

Even if a truce holds, analysts say it will still take time for the oil market to normalize, considering the scale of shut-in production, refinery damage across the region and shipping times.

WHAT'S AHEAD: On next week's economic calendar, investors will closely monitor a series of key U.S. data releases and policy signals, with particular attention on the PPI report, Federal Reserve speeches, and jobless claims data.

OPEC is scheduled to release its monthly report on Monday, followed by the IEA on Tuesday. Both updates are expected to provide fresh data on the current oil supply shortage and help frame recent market tightness with more concrete figures.

Particular attention will be paid to Chinese crude oil imports following the closure of the Strait of Hormuz, especially in relation to refinery throughput, analysts at Commerzbank said. The relevant data is due for release next week.

Write to Giulia Petroni at [e-mail]

(END) Dow Jones Newswires

04-10-26 1040ET