Geopolitical Easing and Weak Supply and Demand Lead to a Significant Drop in International Oil Prices on Tuesday

April 15th, News

On Tuesday, April 14, international crude oil futures plunged, with both benchmark crudes falling in tandem. The market’s core logic has shifted rapidly from the previous geopolitical conflict premium to a combination of easing negotiation expectations and negative fundamental factors. Under the combined impact of four key factors—the signals of resumed U.S.-Iran talks, the partial resumption of shipping through the Strait of Hormuz, the IEA’s downward revision of supply-and-demand forecasts, and the sharp increase in API inventories—previously concentrated risk premiums have begun to dissipate, resulting in a synchronized weakening trend across crude oil and downstream refined products.

I. The futures market experiences a sharp correction, with risk premiums concentratedly released.

All main contracts closed lower: At the close on April 14, New York time, NYMEX May WTI crude oil futures plunged by $7.80, marking a price decline of 7.87%. The settlement price came in at $91.28 per barrel, setting a new daily price decline record for the recent period. ICE June Brent crude oil futures fell by $4.57, with a price decline of 4.6%, closing at $94.79 per barrel.

The refined oil market is weakening in tandem: In June, RBOB gasoline futures fell by 2.4%, closing at $2.9704 per gallon; June heating oil futures prices dropped by as much as 5%, closing at $3.4726 per gallon. Although the decline in refined oil prices was smaller than that of crude oil, the overall trend remains weak, reflecting market expectations that downstream demand will continue to remain sluggish following the easing of crude oil supply concerns.

The price spread structure is diverging: Brent crude oil, being more susceptible to global supply disruptions, has seen a significantly smaller price decline than WTI (4.6% vs 7.87%). As a result, the price spread between the two has narrowed from nearly $5 the previous day to $3.51. This shift reflects the market’s pricing of easing global supply risks; however, uncertainties remain in the Middle East situation, making Brent relatively more resilient to downward pressure.

II. Geopolitics: Expectations of Easing Conflict Rise; Houthi-Hormuz Impasse Shows Signs of Lethargy

The signal of U.S.-Iran peace talks has become the central driving factor: On April 14, local time, UN Secretary-General António Guterres publicly stated that the U.S. and Iran are highly likely to restart peace talks, emphasizing that maintaining a ceasefire during negotiations is crucial. This official signal completely reversed the market’s previous pessimistic outlook—that the conflict would escalate and the strait would remain closed for an extended period—prompting traders to swiftly unwind the geopolitical risk premium. Additionally, navigation through the Strait of Hormuz is gradually resuming. Despite the U.S. military’s closure of the port, according to CCTV News citing local media reports, more than 20 commercial vessels have successfully passed through the Strait of Hormuz over the past 24 hours. Although traffic volume remains below pre-conflict levels (normal around 20 million barrels per day, currently only about 3.8 million barrels per day), there are clear signs of recovery in this critical waterway, alleviating market fears of a complete disruption to global oil transportation. Market sentiment has turned optimistic, with investors now betting on an improvement in the situation. Supply disruptions that had been fully priced in earlier are gradually being unwound, and the retreat of geopolitical premiums has become the primary driver behind this round of price declines.

III. Supply and Demand Fundamentals: Both Supply and Demand Weak, Inventories Remain High

IEA Cuts Supply and Demand Forecasts

The International Energy Agency (IEA) Releases a Major Negative Report: On April 14, the IEA’s monthly report significantly lowered its outlook for the global oil market. The core negative factors focus on three key points:

Record-breaking supply shock: The conflict in the Middle East and the closure of the Strait of Hormuz caused global oil supplies to plunge by 10.1 million barrels per day in March, dropping to 97 million barrels per day—the most severe supply disruption on record. However, the report also emphasized that restoring navigation through the strait is central to easing supply tensions, echoing expectations of geopolitical de-escalation.

Demand expectations have shifted from growth to decline: The global demand growth forecast for 2026 has been lowered by 80,000 barrels per day, and demand in the second quarter is expected to fall by 1.5 million barrels per day year-on-year—a quarterly decline that is the largest since the pandemic began. High oil prices and supply shortages have already triggered a deterioration in demand, with consumption of naphtha and jet fuel in the Middle East and Asia-Pacific regions among the first to weaken.

Supply expectations have been significantly lowered: Global oil supply in 2026 is projected to decline by 1.5 million barrels per day, solidifying a scenario of weak supply and demand. As a result, the market is shifting from “panic over supply shortages” to an expectation of a fragile equilibrium characterized by simultaneous declines in both supply and demand.

API inventory accumulates beyond expectations

According to data from the American Petroleum Institute (API), as of the week ending April 10, U.S. crude oil inventories surged by 61 million barrels, far exceeding market expectations. Gasoline inventories also rose by 626,000 barrels, while distillate fuel inventories fell by only 3.36 million barrels. The buildup in U.S. inventories underscores China’s ample supply and weak demand, further weighing on WTI prices and serving as the key reason why its price decline has been greater than that of Brent.

Outlook: Short-term Wide Range Fluctuations, Medium- to Long-term Uncertainty

According to crude oil analysts, in the short term, oil prices will maintain a relatively wide range of fluctuations. The market is characterized by a mix of bullish and bearish factors, with downward pressure mainly driven by expectations of geopolitical easing and fundamental negative factors. However, the situation in the Middle East remains volatile, making it difficult for oil prices to sustain a continuous decline. In the medium term, three key variables need to be closely monitored: firstly, the progress of U.S.-Iran negotiations; whether the negotiations can be successfully concluded and whether the ceasefire can be sustained are critical factors. If the negotiations fail or the conflict escalates, oil prices will quickly rebound, challenging previous highs. If the negotiations proceed smoothly and the strait is fully navigable, the geopolitical premium will completely dissipate, and oil prices are likely to quickly adjust downward. At the same time, inventory and demand data should be closely tracked, as the market has entered a critical phase of intensified bull-bear competition and rapid shifts in logic.