Crude rebounds toward USD 100 as Hormuz bottlenecks keep physical market tight

Key points:

• Ceasefire-driven sell-off proves short-lived as restricted Strait traffic continues to constrain supply, driving WTI and Brent back towards USD 100.
• Dated Brent highlights ongoing physical tightness, trading well above futures amid prompt scarcity.
• Even a full reopening would leave months of disruption due to logistics, storage and repairs.

• Any additional short-term weakness would primarily reflect a speculative clean-out rather than a deterioration in underlying bullish fundamentals

Market rebound as positioning flush meet constrained reality

Crude prices have staged a notable rebound after suffering their biggest one-day drop since April 2020, with Brent once again challenging resistance below USD 100. While the announcement of a U.S.-Iran ceasefire initially triggered a sharp unwind in geopolitical risk premium and long-liquidation from wrong-footed speculators, the market has quickly refocused on the underlying reality: the Strait of Hormuz remains effectively constrained, and the global oil system is operating far from normal.

According to reports, Iran is currently allowing only around a dozen vessels per day to transit the Strait, down sharply from more than 100 daily crossings prior to the conflict. This bottleneck has left the majority of the more than 1,000 commercial vessels inside the Persian Gulf effectively stranded, while uncertainty around safety, insurance and potential escalation continues to deter shipowners from sending in empty tankers to load fresh cargoes.

As a result, the market is not dealing with a reopening, but rather a controlled and highly inefficient flow regime. While futures markets have attempted to price a partial normalisation, the physical market continues to reflect acute scarcity.

Part of the sharp initial sell-off following the ceasefire announcement can be attributed to positioning rather than fundamentals. A 470 million barrel Brent gross long and an elevated 11.7 long-short ratio held by managed money traders in the latest reporting week to 31 March undoubtedly weighed on prices during Wednesday’s slump. The scale of the positioning left the market vulnerable to a rapid flush once headline risk eased. Looking ahead, further downside will likely hinge on whether additional near-term long liquidation is required. In that context, any renewed weakness would primarily reflect a speculative clean-out rather than a deterioration in underlying bullish fundamentals.

Prompt market stress persists while reopening offers limited near-term relief

Nowhere is the ongoing tightness more evident than in the behaviour of Dated Brent. The benchmark for prompt cargoes settled at USD 124.5 per barrel midweek, down from a record USD 144.5 prior but still well above the June Brent futures, with several bids reportedly left unanswered—an indication that immediate supply remains extremely constrained. This divergence between spot and futures reinforces the message seen across the forward curve: the issue is not long-term availability, but near-term accessibility.

Even in a scenario where the Strait fully reopens, the oil market faces a prolonged period of adjustment. Shipping flows will not normalise overnight. Tankers currently trapped inside the Gulf must first exit, while inbound traffic is likely to remain cautious until safety and insurance conditions stabilise. Industry estimates suggest it could take several weeks, and potentially up to two months, before traffic flows return to anything resembling normal levels.

Beyond shipping, infrastructure constraints present an additional hurdle. Several refineries and export terminals across the region have suffered damage and require repairs before resuming full operations. Recent examples suggest restart timelines can range from around one to two weeks for less severe disruptions, but system-wide recovery is likely to take longer given the scale and geographic spread of the damage.

At the same time, storage dynamics are emerging as an additional constraint. With exports severely restricted in recent weeks, storage tanks across key producing regions have filled up, forcing some producers to shut in output. Restarting these wells is not always immediate, particularly in more complex fields, adding another layer of delay before supply can fully return to the market.

Taken together, these factors point to a staggered and uneven recovery process, where partial improvements in flows do not immediately translate into abundant supply. In effect, the oil market is entering a “repair-and-restart” phase rather than a clean reset.

U.S. inventories rise, but exports set to surge

On the U.S. side, the latest data from the Energy Information Administration offers a contrasting, but ultimately complementary, picture. Commercial crude inventories rose for a seventh consecutive week to their highest level since June 2023, while stocks at Cushing climbed back toward their five-year average. At face value, this helps explain why WTI continues to trade at a notable discount to Brent, reflecting relatively comfortable inland supply compared with seaborne markets.

However, this build in inventories likely reflects temporary logistical dislocations rather than weak demand. With Middle East flows disrupted, global buyers are increasingly turning to the U.S. for supply. The number of empty tankers heading toward U.S. ports has surged in recent weeks, pointing to a coming acceleration with analysts expecting a record month for exports. 

In refined products, the situation remains more acute. U.S. gasoline and diesel inventories both declined in the latest reporting week, driven by a combination of lower refinery runs and strong export demand into a fuel-starved global market. Distillate stocks remain below seasonal norms, highlighting continued tightness in middle distillates.

Bottom line: tightness persists despite ceasefire

In conclusion, the ceasefire has reduced the immediate risk of further escalation, but it has not resolved the underlying supply disruptions. As long as traffic through the Strait of Hormuz remains restricted, and as long as infrastructure, storage and shipping constraints persist, the oil market is likely to remain tight - especially in the prompt segment.

Prices may no longer reflect peak panic, but neither do they signal a return to normal. Near-term direction will partly depend on whether positioning continues to adjust, but the broader message remains unchanged: the physical market is still in short supply, and until flows move freely again, it will continue to set the tone, ultimately carrying the risk of prices being forced higher to levels that kills demand in order to find a balance between demand and disrupted supply.