Oil prices saw declines after initial gains as geopolitical tensions between the U.S. and Iran escalated, raising concerns about potential crude supply disruptions from the Middle East. A fragile ceasefire appears to be unraveling, with military actions and warnings impacting market sentiment. Experts warn of rapidly depleting refined product inventories and localized fuel shortages in specific regions globally.
Global oil prices experienced a dip on Tuesday, moderating from significant gains observed in the previous trading session. Traders are actively evaluating the immediate risks to crude supply chains as heightened tensions between the United States and Iran cast a shadow over energy markets.
The delicate ceasefire between Washington and Tehran showed signs of unraveling on Monday, following reports of Iranian drone and missile attacks on the United Arab Emirates. Concurrently, the U.S. asserted that it had neutralized Iranian vessels in the strategically vital Strait of Hormuz.
Addressing Fox News, U.S. President Donald Trump issued a stark warning, stating that Iran would face severe consequences if it targeted American ships tasked with safeguarding commercial traffic through the strait. In a separate message on Truth Social, Trump mentioned an attack on a South Korean cargo vessel in the waterway, urging South Korea to join the protective mission.
Futures for Brent crude, the international benchmark, saw a 0.60% decline to $113.77 per barrel for July delivery. U.S. West Texas Intermediate (WTI) futures also decreased by 1.35% to $105.06 per barrel. These declines followed Monday’s performance where Brent surged by 6% and WTI by 4%.
While global oil inventories are not yet at critical levels, the rapid pace of drawdowns and the uneven distribution across different regions are prompting fears of localized shortages, as noted by Goldman Sachs in a recent report. The investment bank highlighted that easily accessible reserves of refined products, including petrochemical feedstocks like naphtha and LPG, as well as jet fuel, are quickly diminishing.
Chevron CEO Mike Wirth reinforced these concerns on Monday, emphasizing that fuel shortages are becoming a significant issue in various parts of the world, particularly as the Strait of Hormuz remains a flashpoint. Speaking at the Milken Institute Global Conference, Wirth articulated, “I think as people look at the realities of very tight supplies, it’s not just a question of price. It’s actually — can we get the fuel? I think over the course of the next several weeks, we’ll see those effects begin to move throughout the system.”
Goldman Sachs estimates that total global oil stocks, encompassing crude and refined products held on land and at sea, currently stand at approximately 101 days of demand. This figure could drop to 98 days by the end of May. Although these aggregate numbers are still above emergency thresholds, they obscure acute shortages in specific regions and for particular products, especially where export restrictions are hindering supply flows.
The bank’s analysts specifically pointed to an elevated risk of product scarcity in South Africa, India, Thailand, and Taiwan, based on their assessments of refined product supply and individual countries’ crude stocks.
