WTI prices continue to hold near multi-month highs as the market remains extremely sensitive to developments in the Middle East. The main driver behind the rally remains supply disruptions through the Strait of Hormuz and ongoing tensions between the United States and Iran.
Against this backdrop, WTI continues to trade above $100 per barrel, as the energy market has effectively entered a state of “managed deficit,” where any additional disruption could sharply accelerate the rise in prices.
Inventories are falling as the market loses its “safety cushion”
According to the latest IEA estimates, global oil inventories are declining at record pace. In March and April alone, worldwide reserves fell by more than 240 million barrels as countries were forced to offset supply disruptions. Additional support for prices comes from strong gasoline demand in the United States and limited spare production capacity among several major producers. Market concerns are growing that, if current conditions persist, OECD inventories could fall to critically low levels as early as this summer.
OPEC+, US production, and the demand factor
Despite rising prices, the market remains closely focused on OPEC+ policy decisions and the trajectory of US oil production. The EIA expects higher prices to eventually stimulate growth in US shale production, although the process takes time and is still unable to quickly offset the current supply deficit. At the same time, OPEC continues to take a cautious approach toward increasing output, while investors are also assessing risks of weaker global demand due to elevated energy prices and slowing economic growth in China and Europe.
What’s next
In the short term, crude oil remains in a strong uptrend, with the geopolitical premium continuing to support the market. As long as the situation around the Strait of Hormuz and Iran remains unstable, buyers are likely to stay in control of price action. Under the current conditions, WTI could continue moving toward $110 with potential for testing even higher levels, while any signs of de-escalation could trigger a sharp correction.
As I mentioned earlier in the article U.S. crude holds above $100 as inventories fall, traders remain focused on US inventory data, OPEC+ decisions, and any news related to supply flows from the Persian Gulf region.
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