Oil holds below $100 as Strait of Hormuz buffers near exhaustion

WTI settled at $97.91 on Thursday — still short of $100 — despite the Strait of Hormuz entering its third month of effective closure and removing up to 13 million barrels a day from international markets. The muted price response is drawing scrutiny. Frederic Lasserre, head of analysis at Gunvor Group, told an industry conference in late April that if the closure runs another month, markets will hit tank bottoms. The strait shut down commercially after the U.S.-Iran conflict began on February 28, when roughly 20 percent of global oil supply transited the chokepoint. Daily ship passages have since fallen from a pre-war average of 140 to minimal commercial flow. On Monday, WTI climbed $1.80 to $96.20 and Brent rose $3.13 to $108.46 after peace talks collapsed and President Trump offered safe passage to vessels trapped in the strait — an 8 percent move that struck many traders as subdued given the scale of the disruption. Morgan Stanley identified why prices haven't broken higher. A 3.8 million barrel-per-day surge in U.S. exports and a 5.5 million barrel-per-day collapse in Chinese imports have together absorbed 9.3 million barrels per day of tightness. Factor in supply growth outside the Gulf and subtract expected Gulf production increases of 1.3 million barrels per day, and the net shortfall still works out to 12.3 million barrels per day — more than 10 percent of global consumption. The cushion is depleting. U.S. and allied inventories have drawn down 52 million barrels over four consecutive weeks. U.S. shale cannot close that gap quickly; production ramps take three to six months and would initially yield only 300,000 to 700,000 barrels per day. Goldman Sachs raised its fourth-quarter price forecasts to $90 a barrel for Brent and $83 for WTI, citing reduced Middle Eastern output — an implicit judgment that the current equilibrium won't last through year-end. LNG faces a starker version of the same constraint. Oil producers can reroute around the Arabian Peninsula via pipeline; LNG cannot. Middle Eastern exporters have spent two months searching for alternative export routes with limited success, and vessels continue to avoid Hormuz over fears of being caught in the crossfire if the ceasefire collapses. Some traders argue the worst of the volatility is behind them. Futures are showing smaller swings to each diplomatic headline out of Washington, suggesting the market has largely priced in an extended closure. That would explain why WTI hasn't cleared $100 despite a supply disruption without modern precedent. The divergence between easing paper volatility and tightening physical supply is, however, the setup for a disorderly repricing if the buffers give out before diplomacy delivers. Iran is demanding safe passage through Hormuz plus security guarantees for the wider region and Lebanon as conditions for any settlement. Trump has rejected those terms. Talks are stalled. Gunvor's Lasserre has flagged June as when inventories could approach tank bottoms if the closure holds. Weekly U.S. draw data is the clearest near-term signal; four consecutive weeks have already totalled more than 50 million barrels combined. Any restart in Washington-Tehran dialogue would shift the picture quickly — as would the first confirmed commercial vessel movement through the strait.