Oil prices settle at multi-week highs as global supply worries mount

[NEW YORK/LONDON] Oil prices surged over 6 per cent on Wednesday (Apr 29) to settle at their highest in weeks, as deadlocked US-Iran negotiations made investors more concerned about prolonged disruptions to Middle Eastern supply.

US government data showed a bigger weekly draw in crude and fuel inventories than expected, which also put upward pressure on oil prices.

Brent crude futures for June rose for the eighth consecutive session and settled up US$6.77, or 6.1 per cent, at US$118.03 a barrel, the highest since Mar 31. The global benchmark climbed further in post-settlement trade to hit US$120 a barrel for the first time since June 2022.

US West Texas Intermediate futures for June rose US$6.95, or 7 per cent, to US$106.88 a barrel, the highest since Apr 7.

A White House official said that US President Donald Trump had asked US oil companies about ways to mitigate the impact of a potentially months-long US blockade of Iranian ports, adding to concerns that disruptions to Middle Eastern oil supply could be prolonged.

Over US$50 billion worth of crude oil supply had been lost since the start of the Iran war, according to Reuters calculations as at mid-April.

“If Trump is prepared to extend the blockade, supply disruptions would worsen further and continue to push oil prices higher,” Haitong Futures analyst Yang An said.

Peak demand season adds to supply concerns

Signs of tightening supply have started to show in the US Energy Information Administration data showed US crude stocks fell over six million barrels last week, versus analysts’ estimate of just over 200,000 barrels.

US stockpiles of petrol and distillate fuels, made up primarily of diesel, also fell more than expected last week, raising concerns of potential shortages in the top fuel-consuming nation just as peak summer driving season gets underway.

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“Prices will likely find renewed support as summer approaches and incremental product demand converges with supply constraints,” RBC Capital Markets analysts wrote on Wednesday.

Elsewhere, Abu Dhabi National Oil Company has notified some customers they could load two crude grades outside of the Gulf next month because the Strait of Hormuz remains closed, according to two sources with knowledge of the matter and a notice seen by Reuters.

Investors assess UAE leaving Opec

Investors were also assessing ramifications of the United Arab Emirates’ decision to quit Opec.

Analysts do not expect any major near-term impact on the market. Over the near term, Middle Eastern producers will bring whatever they can to market, Investec head of commodities Callum Macpherson said.

Still, the UAE’s exit is the most significant fracture in Opec’s history and it increases the risk of oversupply that could cause oil prices to decline from 2027, Wood Mackenzie said.

“UAE’s departure from Opec will have minimal impact on market fundamentals in 2026, even if the Strait of Hormuz reopens,” said Simon Flowers, chief analyst at Wood Mackenzie.

“Beyond this year, losing the UAE will compound Opec’s challenge to balance the market and increase the risk of oversupply weakening prices,” Flowers said. REUTERS