| Commoditiy | Price | Weekly Change | 50day-Ave | 100day-Ave | 200day-Ave |
|---|---|---|---|---|---|
| Brent ($/b) | 109.81 | 5.60 | 104.04 | 86.12 | 75.47 |
| US WTI ($/b) | 106.21 | 8.14 | 97.91 | 81.02 | 71.05 |
| ICE Gasoil ($/MT) | 1,204.75 | 26.25 | 1,244.56 | 977.99 | 832.38 |
| Jet CIF NWE ($/MT) | 1,320.91 | 42.77 | 1,450.58 | 1,116.66 | 917.67 |
Markets are higher this morning after the UAE and Saudi Arabia reported drone strikes. Saudi Arabia intercepted three drones coming from Iraqi airspace, presumably fired by Iranian backed militias. In the UAE a drone got through air defences and caused minor damage at a nuclear power station and was said to have come from the Western border, perhaps suggesting this has also been fired from Iraq or maybe Yemen? This could be an effort by Iran to apply pressure on the US without attacking from its own territory which could risk open hostilities restarting. Trump has also been expressing frustration with the lack of progress on talks and warned Iran that it had “They better get moving, FAST, or there won't be anything left of them”
In terms of diplomatic developments between the US and Iran, it has been eerily quiet. There have been no new proposals from either side since Trump dismissed Iran’s latest plan on the previous weekend. Trump did discuss the closure of the Strait with Xi during his trip to China, but no proposals emerged in public. There are reports that Iran is about to present a new proposal on the reopening of the Strait, but one that involves Iran maintaining significant control. An Iranian spokesperson said that it has “prepared a professional mechanism to manage traffic in the Strait of Hormuz along a designated route, which will be unveiled soon” and that “In this process, only commercial vessels and parties cooperating with Iran will benefit from it.” This is unlikely to be acceptable to the US or gulf states.
Last week the International Energy Agency (IEA) published its monthly oil market report and highlighted that the supply disruptions were “depleting global oil inventories at a record pace”. The IEA estimates global inventories to have been around 8.2 billion barrels before the war started, having climbed sharply in 2025 from more typical levels of 7.6 to 7.8 billion barrels. In April and March, the IEA estimates that inventories fell by well over 100 million barrels per month, a rate of loss that has likely continued this month. This suggests that the market could endure several more months of reduced output before inventories drop below typical levels, but the reality is more complex. The rerouting of shipping has led to longer journeys tying up more inventory in transit and the product mix of inventories does not necessarily match the product type or location needed. For example, jet fuel and diesel in Europe and Asia are particular challenges.
The fall in the IEA’s production estimate for OPEC+ countries, is stark. OPEC+ output has fallen from 43.2 mb/d in February to 34.1 mb/d in April. Within that, Saudi Arabia has managed to continue producing 7 mb/d (down from 10.4mb/d before the war) thanks to its pipeline to the Red Sea, while the UAE (now no longer an OPEC+ member, but still included in the OPEC+ numbers for now) has continued to produce 2.4 mb/d (down from 3.6 mb/d) as it also has the ability to route much of its output around the Strait.
Demand reduction in response to high prices has played a part in dealing with disruptions. The IEA has trimmed its estimate of 2026 output further, down to 104 mb/d, which is around 1mb/d below estimates before the war started and is 400 kb/d below the 2025 average. Q2 demand is now expected to be only 101.3 mb/d down from 102.1 mb/d in its last report. The IEA see demand recovering in Q3, but for this to be possible without prohibitively high prices, supply will need to rebound too.
Brent has rallied up from 100 \$/b at the start of last week, gas and electricity prices are higher too. Jet and diesel prices have been more stable though, but still at a significant premium to Brent. European jet fixed at 170 \$/b on Friday and diesel at 165 \$/b. A lot will hinge on the next Iranian proposal to end the war. If Trump finds something in it that could form the basis of progress, then market fears may dissipate, otherwise the risk is of prices moving higher still.
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