The Strait of Hormuz has been closed for ten weeks, eliminating 14% of global oil Supply. Yet Brent Crude holds at $107. Here is why that calm may not last.

Key Highlights

  • Nearly 14 million barrels per day of oil have been removed from global supply since the Strait of Hormuz closed.
  • S. net petroleum exports hit an all-time high of approximately 9 million barrels per day in the four weeks to May 10th.
  • China's crude imports fell by 6.6 million barrels per day over the same period, suppressing global Demand signals.
  • Diesel, gasoline, and jet fuel prices have risen 60 to 120 percent across major markets, far outpacing the 40 percent rise in crude.
  • Washington is reportedly weighing a ban on refined product exports, a move that could severely destabilise global energy markets.

The Price Paradox

Ten weeks into a war that has sealed the world's most critical oil chokepoint, Brent crude trades at roughly $107 a barrel. That figure sits well below the $129 reached after Russia's invasion of Ukraine in 2022, and far short of the $150 to $200 range that analysts had flagged as probable under a prolonged Hormuz closure.

The disconnect is striking. At least 2 billion barrels are projected to be absent from this year's global supply even if the strait reopens immediately. It will not. Diplomatic talks between Washington and Tehran have yielded nothing. Yet the market is pricing in resolution, not reckoning.

Front-month Brent futures settle roughly two months forward. Each time Donald Trump signals a potential breakthrough, traders pull back from pricing sustained disruption. That optimism has spread to spot markets as well. The premium on dated Brent over front-month futures, which peaked at $25 in early April, has since narrowed to a few dollars.

The Supply Response

Outside the Gulf, producers moved with unusual speed. Canada added roughly 400,000 barrels per day of net crude and refined product exports in the four weeks to May 10th compared to the same period in 2024. Venezuela and Norway each contributed approximately 200,000 barrels per day. Brazil added another 100,000 barrels per day.

The most consequential response came from the United States. Net petroleum exports over those four weeks reached nearly 9 million barrels per day, the highest recorded figure, and 3.8 million barrels per day above the equivalent period last year, according to ship-tracking firm Vortexa.

The ramp-up required weeks of logistics work. New contracts had to be executed, reserves drawn down, pipeline capacity booked, and storage cleared at coastal terminals to facilitate blending and loading. Freight rates from the Atlantic to Asia and Europe surged in March to attract additional tankers. To incentivise buyers, the discount on West Texas Intermediate crude relative to Brent and Dubai benchmarks broke historical records.

The combined effort narrowed the effective supply gap to roughly 8 million barrels per day.

The Demand Side Shock

The Import data from major consuming regions tells a troubling story. In the four weeks to May 10th, large oil-buying economies collectively imported approximately 11 million barrels per day less petroleum than during the same period last year.

China accounted for the bulk of that decline. Its crude purchases dropped by 6.6 million barrels per day. Refiners there have resold previously committed cargoes from West Africa to other Asian buyers rather than absorbing them. Onshore storage levels, as tracked by satellite imagery of floating-roof tanks, have barely moved, implying refineries have sharply cut throughput rather than drawn on reserves.

Across Asia and Europe, refinery throughput has been cut by nearly 4 million barrels per day due to crude shortages. The loss of 4.4 million barrels per day of refined product exports from Gulf facilities has pushed diesel, gasoline and jet fuel prices up between 60 and 120 percent in major markets. Petrochemical plants, deprived of naphtha feedstock, are also running at reduced capacity.

Most demand-destruction estimates place the genuine consumption loss below 5 million barrels per day. The remainder of the import decline appears to reflect deliberate deferral, with buyers waiting for lower prices before restocking.

The Fragile Equilibrium

The result is a temporary crude mini-glut. Volumes held on tankers at sea actually rose in April even as refined product stocks fell sharply below five-year averages. This dynamic has suppressed Brent pricing despite the structural supply Deficit.

The equilibrium is fragile. Morgan Stanley analysts have suggested that crude previously stored in unmonitored underground facilities in China may have migrated to observable above-ground storage, quietly covering the shortfall without appearing in import data. Such drawdowns are likely to accelerate.

China holds an estimated 1.2 billion barrels of crude in storage. Even at a drawdown pace of several million barrels per day, imports could remain suppressed for much of the year. However, Beijing is unlikely to pursue full depletion. Maintaining strategic reserves carries geopolitical weight, and a deliberate drawdown would eventually require compensatory purchases at elevated prices.

The American Risk

American export capacity is more constrained than headline figures suggest. As refinery maintenance season ends in the United States, over 500,000 barrels per day currently directed toward exports may be redirected to domestic processing, according to data firm Kpler.

More immediately, motor-fuel inventories in the United States are declining at a record pace. If that trajectory continues, a modest crude price increase could push retail petrol toward $5 per gallon, a threshold last breached in 2022.

The Trump administration is reported to be evaluating a ban on refined product exports to protect domestic fuel availability. With Brent near $100, the probability of such a ban was informally estimated at 35 percent by one industry insider. That figure has since risen and could cross 50 percent if pump prices spike ahead of the Memorial Day weekend on May 25th. A U.S. export ban would remove a critical supply cushion from global markets and sharply increase price pressure in Europe and Asia.

The Road Ahead

America and China have collectively bought the global oil market several months of relative stability. But both buffers are finite. If the Strait of Hormuz remains closed, the structural deficit will reassert itself with increasing severity through the second half of the year.

The calm in crude prices is not evidence of resilience. It is evidence of delay.