Even as the Iran conflict has completed more than 3 months, crude prices have been remarkably calm. If were asked in Jan that where do we see Brent if SoH (Strait of Hormuz) was closed for 3 months, our answer will have been north of $120. So why this divergence between analyst expectations and the real market. And how long this divergence can continue if SoH does not open up. As for the first question of why, the following are the reasons we can think of: 1) actual supply losses are lower than reported 2) demand losses are higher than estimated. On the supply side, we estimate around 1.5-2 mbpd of crude being still supplied by dark ships. We also see increased supply from US, Brazil & Venezuela. On net, we estimate that incremental non-Gulf supply added about 2.1 mbd in March and 2.4 mbd in April, nowhere near enough to replace the roughly 16 mbd of lost Middle East oil supply. On the demand side, China has absorbed a disproportionate share of the adjustment in May. China slashed its crude imports by 3.8 mbd compared to year-ago levels, accounting for roughly 74% of the remaining decline in global crude imports relative to the 2025 average—effectively taking the hit and allowing other countries to stabilize their intake. Also observed global oil inventories, including crude and products, have fallen by 4.6 mbd, an absolute drop of about 450 million barrels. Given the pace of draws, we still expect inventories to reach stress levels somewhere in late June, with operational floor levels approached by September. Preliminary consumption data suggest demand fell by 1.9 mbd versus year ago levels—well beyond the 0.6 mbd decline most of the analysts had pencilled in, given that physical supply was still landing. Going forward there could be demand declines of 3.0 and 4.2 mbd year-over-year, respectively, corresponding to demand destruction of 4.9 and 5.6 mbd. Hence, if SoH does not open by June, Crude can’t remain calm for ever. In such a scenario, we see Brent 120 by Sep & 150 by Dec’26 irrespective of above-mentioned supporting factors.
