Oil prices extended their decline on hopes that the reported talks between the U.S. and Iran could lead to a de-escalation in tensions and potentially allow for the reopening of the Strait of Hormuz, Konstantinos Chrysikos, Head of Customer Relationship Management at Kudotrade, said in a statement sent to Rigzone on Wednesday.
“Optimism surrounding a possible diplomatic breakthrough has eased supply fears, prompting a pullback in prices after the recent surge,” Chrysikos noted in the statement. He warned, however, that “despite the softer tone, the Strait of Hormuz remains effectively closed, with tanker traffic still severely restricted, continuing to disrupt global crude shipments and tighten near-term supply conditions”. Chrysikos went on to state that “this ongoing constraint could keep the market highly sensitive to geopolitical developments”.
The Kudotrade representative warned in the statement that “uncertainty surrounding the progress of negotiations, along with conflicting reports regarding the developments of the talks, is likely to fuel caution”.
“In this environment, oil prices could remain volatile, with the risk of another sharp upside move if a diplomatic resolution fails to materialize within the timeframe indicated by the U.S. administration,” he added.
“The market could decline further if tensions ease in a sustained manner, particularly amid efforts for coordinated releases from strategic petroleum reserves. Such measures would help temporarily offset supply disruptions, provided geopolitical risks in the region abate,” Chrysikos continued.
In a BMI report sent to Rigzone by the Fitch Group late Tuesday, analysts at BMI, a unit of Fitch Solutions, highlighted that Brent crude “sold off sharply on March 23, closing below $100 per barrel, down by more than 10 percent from the previous day’s close”.
“The sell-off was triggered by U.S. President Donald Trump’s post touting negotiations with Iran and postponing planned strikes on Iranian power infrastructure for five days,” they added.
“Previously, on March 21, the president had given Tehran 48 hours to reopen the Strait of Hormuz before the strikes began. It is the latest bout of volatility in a war characterized by an extremely high degree of noise, masking strong underlying signals for Brent,” they continued.
Rigzone has contacted the White House and the Iranian Ministry of Foreign Affairs for comment on Chrysikos’ statement and the BMI report. At the time of writing, neither have responded to Rigzone.
In a statement sent to Rigzone by the Enverus team on Tuesday, Enverus subsidiary Enverus Intelligence Research (EIR) announced that its Brent crude price forecasts had been “upgraded significantly”, with the company now projecting an average of $95 per barrel through 2026 and $100 per barrel in 2027, “assuming the Strait of Hormuz remains largely closed for three months”.
“Each month of constrained Strait of Hormuz flows changes the EIR outlook by approximately $10-$15 per barrel, highlighting the historic significance of the disruption and high uncertainty on duration,” EIR said in the statement.
EIR Research Director Al Salazar said in the EIR statement, “the world has an oil flow problem that is draining stocks”.
“Whenever that oil flow problem is resolved, the world is left with low stocks. That’s what drives our oil price outlook higher for longer,” he added.
In a J.P. Morgan report sent to Rigzone by the JPM Commodities Research team on Tuesday, J.P. Morgan said its oil strategists “note that while the duration of a potential Iran – Strait of Hormuz conflict is highly uncertain, the supply arithmetic is clearer – 16 million barrels per day is effectively sidelined today and an estimated 10 million barrel per day shortfall by April”.
J.P. Morgan stated in this report that “the estimated value of open interest in energy markets increased by eight percent WoW ($71 billion WoW) to $1 trillion”.
“Crude oil and petroleum products markets accounted for 66 percent of this increase, primarily driven by a steep increase in prices (ICE Brent Crude up eight percent WoW, ICE Gas Oil up 18 percent WoW) amidst the ongoing conflict in the Middle East and supply disruptions,” it added.
To contact the author, email
