Even if a US-Iran ceasefire agreement is extended, global crude and refined product inventories still face significant reduction risks. According to the latest financial research reports, the tense situation in the Strait of Hormuz could lead to inventory declines of up to 900 million barrels by the end of June, marking the lowest level in the past eight years. The analysis team notes that this includes 500 million barrels already lost plus an additional 400 million barrel reduction due to delayed production resumption and conflict damage. This implies that even if the conflict ended immediately this week, rebuilding these inventories—even assuming a rapid post-war recovery of 1 million barrels per day in excess supply—could take more than two years.
Regarding future trends, the report outlines three possible scenarios. In the base case, assuming an extended ceasefire and gradual recovery of shipping and production, the average Brent crude price for the second quarter is projected at $95 per barrel, followed by a quarterly decline. Should the interruption persist for another month, total losses would rise to approximately 1.3 billion barrels, driving Q2 prices to spike to $110. In the most pessimistic forecast, if the disruption lasts eight to nine weeks, total losses would reach 1.7 billion barrels, keeping oil prices at highs around $130 through the third quarter. Each day of delay equates to global consumption of roughly 13 million barrels of crude oil, further intensifying inventory pressure.
Geopolitical dynamics are further exacerbating market uncertainty. The US President recently suggested that a ceasefire was "extremely unlikely" and warned of military escalation if an agreement was not signed by the deadline. Meanwhile, the US Central Command stated it had intercepted multiple vessels entering and exiting Iranian ports, highlighting the urgency of the situation. Impacted by this, New York oil prices surged more than 5% on Monday, breaking the $95 per barrel mark. Current West Texas Intermediate crude oil futures are trading near $89.40, while Brent crude oil futures hover around $95.36.
Facing potential upside price risks, institutions advise investors to hedge by rolling long near-term crude oil positions. The crux of the solution lies in whether relevant nations can focus on preventing the worst-case scenario of widespread destruction of Middle East energy infrastructure. While a breakdown in negotiations remains possible, the bank expects a preliminary agreement may still be reached this week. Once talks stall, the market will pivot to concerns regarding long-term disruptions, at which point volatility is expected to amplify further.
