The Oil Market's Response to Recent Global Events

Recap: The oil market continued to trend higher early in the session but ended 1.14% lower as the market weighed the fragile Middle East ceasefire and the summit between U.S. President Donald Trump and China’s President Xi Jinping scheduled to start on Thursday. President Trump arrived in Beijing on Wednesday after stating on Tuesday that he did not think he would need China’s help to end the war with Iran, even as the prospect for a lasting peace deal weakened. The crude market erased some of Tuesday’s gains in overnight trading and posted a low of $100.56. However, the market bounced off its low and retraced its losses ahead of the release of the weekly petroleum stocks report. The oil market rallied to a high of $103.67 following the release of the EIA report, which showed a larger than expected draw in crude stocks of 4.3 million barrels in the week ending May 8^th. The market later erased its gains once again and traded back towards its lows. The June WTI contract settled in a sideways trading range during the remainder of the session and ended the day down $1.16 at $101.02. The July Brent contract settled down $2.14 at $105.63. The product markets ended the session lower, with the heating oil market settling down 19.21 cents at $3.9667 and the RB market settling down 7.9 cents at $3.6187.

Technical Analysis: The crude market will likely retrace some of its losses as the market refocuses on the oil inventory draw. The market will also look for further direction from the meeting between U.S. President Donald Trump and China’s President Xi Jinping scheduled to start on Thursday. President Trump is expected to ask China for help on resolving the war with Iran. While China’s President may agree to urge Iran’s leaders back to the negotiating table, he may be reluctant to cut its economic support to its most important partner in the Middle East. The oil market is seen finding support at $100.56, $98.00, $96.13, $95.99, $93.82, $93.38, $89.85 and $88.66. Meanwhile, resistance is seen at $103.67, $105.48, $107.46 and $110.93.

Fundamental News: The International Energy Agency said global oil supply will fall by around 3.9 million bpd across 2026 due to disruptions caused by the Iran war, with over 1 billion barrels of Middle East supply already lost. In its monthly oil market report, the IEA said the decline in supply will outpace falling demand, which it now expects to decline by 420,000 bpd this year compared with a previous forecast of an 80,000 bpd drop. Demand is also under pressure from the war as price spikes lead to demand destruction and slower economic growth. The IEA sees total world oil supply 1.78 million bpd lower than demand in 2026, compared with 410,000 bpd higher in its previous report. It said the war in the Middle East is depleting global oil inventories at a record pace following a 246 million barrel draw down in March-April.

OPEC lowered its forecast for world oil demand growth in 2026, joining other forecasters such as the IEA that have reduced their expectations due to the Iran war. It cut its 2026 global oil demand growth forecast to 1.17 million bpd, compared with a previous forecast of 1.38 million bpd. OPEC sees world oil demand in the second quarter at 104.57 million bpd, down from a previous forecast of 105.07 million bpd. OPEC also raised its forecast for 2027 oil demand growth to 1.54 million bpd from a previous forecast of 1.34 million bpd. It also reported that OPEC+ output averaged 33.19 million bpd in April, down 1.74 million bpd on the month as the Iran war prompted Middle East members to cut their output.

U.S. Vice President JD Vance said he believes progress is being made in negotiations with Iran to end hostilities, after President Donald Trump rejected Tehran’s latest proposal as unacceptable.

Bloomberg reported that oil shipments from Iran’s main export terminal appear to have come to a standstill over the past several days, the first sign of a prolonged halt since the start of the war. European satellite images showed that there were no ocean-going oil tankers observed at Kharg Island on May 8^th, 9^th or 11^th.

Early Market Call – as of 8:30 AM EDT

WTI – June $100.33, down 66 cents

RBOB – June $3.5535, down 5.22 cents

HO – June $3.9185, down 4.05 cents

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