A peculiar situation has emerged in global oil markets, where crude prices remain relatively steady even as supply disruptions persist. Brent crude has consistently traded in the upper $90 range throughout the past week, showing little volatility despite ongoing tensions in the Persian Gulf region that have now stretched beyond seven weeks.
The seeming calm in pricing comes against a backdrop of continued geopolitical uncertainty. Diplomatic efforts have stalled, with Iran choosing not to attend a second round of negotiations, leading to their indefinite postponement. Presidential action has extended a temporary ceasefire without a fixed endpoint, contingent upon proposal submissions and conclusion of discussions. Naval enforcement measures blocking maritime traffic to and from Iranian ports remain in effect.
Despite equity markets reaching new peaks daily, underlying conditions in the petroleum sector remain as challenging as they were at the conflict’s inception nearly two months prior.
Analysis from Goldman Sachs identifies three primary factors explaining why futures prices, physical crude valuations, and refined product costs have all declined despite minimal flows through Hormuz and exceptional drawdowns in worldwide visible inventories. These factors include reduced risk premiums, inventory reductions based on anticipated reopening of the Strait, and decreased spot market purchasing activity.
However, projections indicate that global visible petroleum
inventories will likely hit unprecedented lows even under optimistic scenarios assuming Hormuz passage recovers by late April.
Throughout April, worldwide visible oil inventories have depleted at an average rate of 6.3 million barrels daily. Goldman’s calculations for total global oil withdrawals, including refined product storage in non-OECD nations that aren’t readily visible, show draws of 10.9 million barrels per day this month—the most severe monthly depletion recorded since 2017. Cumulative oil draws since hostilities began have reached 474 million barrels.
Current estimates place oil flows through the Strait of Hormuz at roughly 10 percent of normal levels, or approximately 2.0 million barrels daily based on four-day moving averages. Even following a complete reopening, flow recovery will likely proceed gradually due to logistical challenges including reversing production shutdowns, tanker transit times, and pipeline capacity limitations. Consequently, global oil inventory declines appear set to persist through May and potentially beyond.
Extreme inventory withdrawals create increasingly tight physical markets requiring substantially elevated prices for immediate delivery compared to future month contracts, particularly when market participants anticipate brief disruptions. This backwardation pattern explains the apparent disconnect between spot physical oil prices for immediate delivery versus nearby futures contracts for June delivery.
The premium for exchanging Brent futures from paper contracts to physical barrel delivery for identical delivery windows has not exceeded $2 per barrel during the past two months. Meanwhile, the premium for dated Brent requiring immediate delivery versus nearby futures recently moderated from nearly $40 per barrel to a still-elevated $10 as delivery period gaps between both contracts narrowed.
Goldman attributes the moderation in physical market prices to a transition from restocking and panic purchases in March toward destocking in April. Some Asian refineries, particularly Chinese facilities, have reportedly begun re-offering previously acquired crude supplies.
Yet destocking cannot continue indefinitely since inventories have natural lower limits. Once reached, the primary rebalancing mechanism absent supply recovery becomes demand destruction.
The global oil-on-water buffer approaches depletion with
non-sanctioned waterborne oil near all-time lows. Russian oil imports have fallen below 2025 averages, while the US waiver permitting Iranian oil imports on water has expired without renewal.
Simultaneously, American oil exports have surged to record levels of 12.7 million barrels daily, with outbound shipment data suggesting even higher exports approaching. However, major Texas pipelines already operate at or above designed capacity, indicating limited potential for further export expansion.
Goldman concludes that while risks to baseline oil price forecasts align closely with current market pricing and remain bidirectional, significant net upside risks exist from extended Hormuz flow disruptions and potentially more enduring Middle Eastern supply losses. Estimated Persian Gulf oil flows currently stand at 9.3 million barrels daily or 40 percent of normal levels, deteriorating by 2.6 million barrels daily—representing estimated Iranian exports since blockade implementation on April 12—to just 0.3 million barrels daily.