Brent Crudes to Reach US$107, Hormuz Supply Risks Back in the Spotlight!
Oil prices rose about 2% on Tuesday (May 12th) after hopes for a quick deal to end the US-Israel war with Iran eased, reigniting concerns about supply disruptions. Brent strengthened more than US$2, or 2.6%, to US$107.09 per barrel, while WTI rose US$2.78, or 2.6%, to US$102.154, after both had risen nearly 2.8% on Monday.
Market sentiment shifted after US President Donald Trump called the ceasefire with Iran "on life support," highlighting differing views on a number of demands, including a cessation of hostilities across the region, the lifting of the US naval blockade, the resumption of Iranian oil sales, and compensation for war damages. This narrative pushed the geopolitical risk premium back into oil prices.
Market participants' primary focus remains on the Strait of Hormuz, a waterway that handles about a fifth of global oil and LNG flows. Iran asserted its sovereignty over the strait, while concerns over potential traffic restrictions have again raised tail supply risks, particularly if tensions escalate or the threat of a blockade resurfaces.
Market participants' comments confirm that volatility remains high. DBS assesses that if an agreement is not reached by the end of May, the risk of oil prices rising remains open. Meanwhile, KCM Trade estimates that a peace breakthrough could trigger a sharp correction of US$8–US$12, but an escalation or threat of a blockade could push Brent back towards the US$115+ area.
On the supply side, disruptions related to the near-closure of the strait have reportedly led some producers to cut exports. A Reuters survey on Monday showed OPEC output in April fell to its lowest level in more than two decades, increasing market sensitivity to any geopolitical developments and production responses.
Outside the Middle East, market attention is also focused on US supply and trade dynamics. A Reuters poll estimates that US crude oil stocks fell by around 1.7 million barrels in the previous week, in line with strong seaborne export flows in the coming weeks, according to Macquarie. The market is also monitoring Trump's planned meeting with Chinese President Xi Jinping on Thursday and Friday, after Washington imposed sanctions on parties accused of facilitating Iranian oil shipments to China, amid trade tensions that have depressed US-China energy trade. (asd)*
Source: Newsmaker.id
