Crude prices stabilised to some extent at elevated levels after Monday’s swings, though they remain exposed to renewed volatility amid rapidly shifting geopolitical conditions.
Headlines could continue to drive the market, with a focus on developments surrounding the US Operation Freedom, after yesterday’s confrontation in the Strait of Hormuz.
On the supply side, the core disruption remains intact. The Strait of Hormuz closure is still constraining energy exports, leaving the physical market tight and maintaining upward pressure on prices.
While the OPEC+ announcement of a 188,000 barrels per day production increase in June and the UAE’s exit from the organisation could lead to higher available output over the long term, the immediate impact could remain limited under current conditions.
Looking forward, the oil market could remain directed by diplomatic and geopolitical developments. While a concrete success in freeing ship navigation could alleviate the pressure, the overall impact could remain limited without a comprehensive resolution. The latter could help release significant volumes of trapped oil, help return markets to normal conditions, and push prices to the downside. Conversely, the supply deficit could persist, keeping crude elevated with continued upside risk on any fresh escalation
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