Inventory Builds Versus Geopolitical Risk
Cushing inventories increased by 3.4m barrels to 30.9m barrels, the biggest weekly gain since January 2023. Crude imports fell to 6.5m b/d, while exports dropped to 3.3m b/d, the lowest since November 2025. Product data were mixed, with gasoline inventories down 2.6m barrels and distillate stocks up 3m barrels. Refinery utilisation rose by 1.5pp week on week to 92.9%. Saudi Aramco is reported to supply about 40m barrels to China in April and around 23m barrels to India, slightly below last month. Disruptions in the Strait of Hormuz have led to rerouting via the Yanbu pipeline on the Red Sea, where export capacity is around 5m bbls/d. We are seeing a classic battle between bearish fundamentals and bullish geopolitical risk, keeping oil prices volatile around the $100 mark. This suggests that buying options to play swings in either direction, such as through straddles, could be more prudent than taking a simple directional bet. The market is waiting for a clear signal to break out of this range.Key Catalysts To Watch
The primary trigger for a major price move remains the US-Iran ceasefire talks, which appear to have stalled again according to the latest reports from Vienna. We should position ourselves for a sharp drop below $95 on any credible de-escalation news, or a push toward $110 if the conflict intensifies. Until then, uncertainty will fuel this choppy price action. The build in US inventories is a significant headwind for prices, with the latest EIA report showing domestic crude stocks are now 8% above the five-year average for this time of year. The sharp drop in exports to levels we last saw in November 2025 confirms that barrels are getting trapped stateside. This inventory surplus puts a cap on any sustained rally in WTI. While gasoline demand appears seasonally healthy, the surprise build in distillates is a warning sign about underlying economic activity. Forward curves for diesel futures have recently flipped into a slight contango, signaling expectations of near-term oversupply. We see this as a bearish indicator for broader global growth. The disruptions in the Strait of Hormuz are creating a clear divide in the market, making seaborne crude more expensive for Asian buyers. This is reflected in the Brent-WTI spread, which has widened to over $7 this week, its largest gap in months. This logistical bottleneck supports trades that favor Brent over WTI. Create your live VT Markets account and start trading now.
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