Oil prices have declined by the biggest margin since the Iran war began in late February, with Brent crude for June delivery and WTI for May delivery retreating to the mid-$90s per barrel, alongside falling refined product prices. The United States and Iran agreed to a temporary two-week ceasefire on Wednesday, with Tehran allowing safe passage for shipping vessels through the Strait of Hormuz. The two weeks are intended as a window to finalize a permanent settlement, with formal talks scheduled to begin in Pakistan. However, oil and commodity analysts at Standard Chartered have argued that the oil price correction could prove too deep, and oil prices could spike on any reports of escalation or re-emerging war rhetoric. Previously, StanChart had issued a second-quarter oil price forecast for Brent crude at $98/bbl, and WTI at 92.50/bbl. Brent crude for June delivery was trading at $95.57 per barrel at 14.30 pm ET, while WTI crude for May delivery was trading at $96.99/bbl
StanChart notes that near-term price movements continue to take direction from escalation and de-escalation in the Middle East conflict, which has triggered several regional flashpoints, reduced transit through the Strait of Hormuz, and shut-in production from Gulf countries. The analysts note that Brent is in backwardation along the forward curve, with the back of the curve stabilizing at $67-70 per barrel; however, they have predicted that oil prices are likely to remain $10-20/bbl higher than pre-conflict levels, supported by purchasing for strategic reserves and the logistical lags caused by the disruption.
Related: At Least 10 Countries Still Sending Ships Through Strait of Hormuz
StanChart expects this trend to continue even when OPEC attempts to resume maximum production capacity. While most Gulf production is from reservoirs with sufficient pressure to restart quickly, transit through the Strait of Hormuz has not suddenly become risk-free, with oil flows largely remaining at Iran’s discretion. The uncertainty regarding technical details on how vessels can transit safely remain unclear, something that will continue to weigh on vessel spot rates and insurance policies. The possibility of transit fees for passage also remains uncertain, although the Omani Minister of Transport has announced that the country has signed all agreements related to marine transport, stipulating that no fees will be imposed for passage. There are media reports that ships still require permission from the Iranian navy or risk being destroyed.
According to StanChart, Iran’s ability to exert such a high level of control over global energy supplies is unlikely to be acceptable to other Gulf producers in the long term, even if it is tolerated for a brief period to clear the vessel backlog. StanChart estimates that there are 426 tankers, 34 LPG carriers and 19 LNG carriers stranded at the Strait of Hormuz, with LNG cargoes likely to be among the first to transit. Recently, two Qatari vessels carrying LNG were forced to abandon an attempt to exit the Strait of Hormuz in what would have been the first export of Qatari LNG in more than a month. The tankers loaded their cargoes in late February just before hostilities began, before moving toward the eastern opening of the strait near Oman on Monday morning. However, they were forced to perform a U-turn on Monday morning. Iran had effectively choked off the waterway, allowing only approved or “non-hostile” vessels to pass.
That said, the natural gas outlook is not as bullish, with StanChart noting that the market is coping remarkably well with the near-term loss of the majority of Middle East gas supply. After all, disruption to Qatari LNG and UAE LNG cargoes is being broadly balanced by expected LNG supply growth in 2026, most notably from the United States.
Indeed, LNG production by the world’s largest LNG exporter could be enough to offset Middle Eastern volumes: U.S. LNG exports are expected to rise by ~13% in 2026, driven by new capacity from Venture Global LNG’s Plaquemines and Cheniere Energy‘s (NYSE:LNG) Corpus Christi Stage 3. Port Arthur LNG (Texas) and Rio Grande LNG are scheduled to begin operations between 2027-2028, with further projects expected to come online in 2030/2031.
U.S. LNG export capacity is projected to more than double between 2024 and 2028, with exports expected to rise from 11.9 Bcf/d in 2024 to 21.5 Bcf/d by 2030, reinforcing the country’s position as the top global exporter. The rapid expansion requires significant new infrastructure to transport the feedgas. Thankfully, the startup of projects like the Matterhorn Express Pipeline is expected to mitigate takeaway capacity constraints, helping to stabilize Waha Hub prices.
By Alex Kimani for Oilprice.com
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