Oil volatile near $105 as Hormuz transit dispute clouds supply outlook

Crude oil prices fluctuated as conflicting political statements clouded the timeline for a resolution over the Strait of Hormuz, offsetting pressure from rapidly depleting global stockpiles.

Brent crude climbed back above $105 a barrel, though it remains down approximately 3% for the week, while West Texas Intermediate hovered near $98.

Market sentiment shifted after Iran noted that a recent US proposal had partially bridged differences between the conflicting parties.

However, optimism was quickly tempered by remarks from the Islamic Republic’s supreme leader regarding the retention of Tehran's uranium stockpile, alongside an ongoing dispute over transit tolls in the crucial Hormuz chokepoint.

The mixed messaging on these core structural issues has left energy markets highly volatile.

Traders are struggling to quantify the geopolitical risk premium or project when commercial energy flows through the strait will fully normalize, particularly following a series of escalatory threats over the past several days.

The prolonged conflict and subsequent supply restrictions have severely impacted the global energy buffer.

According to data from Goldman Sachs Group, global stockpiles of crude oil and refined products are currently being drawn down at a record pace.

Market analysts warn that the buffer for error is shrinking.

If no formal agreement emerges between the warring factions and maritime passage through the Strait of Hormuz remains restricted, global inventory levels will face intense market scrutiny, Commerzbank AG analysts, including Barbara Lambrecht and Carsten Fritsch, noted in a client brief.

Amid the structural tightness, the International Energy Agency indicated it is prepared to intervene again to stabilize markets.

IEA Executive Director Fatih Birol stated on Thursday that the agency remains ready to authorize further emergency stockpile releases if conditions warrant, following an initial coordinated release executed in March.

Keywords: Brent crude, West Texas Intermediate, Strait of Hormuz, oil stockpiles, Goldman Sachs, Commerzbank, International Energy Agency, Fatih Birol, energy supply disruption, crude oil prices