Brent: Conflict-driven supply shock supports prices – Societe Generale

Societe Generale analysts warn that President Trump’s move toward shutting the Strait of Hormuz and ongoing Iranian threats are likely to keep Brent supported. They highlight potential loss of 1.5–2.0 mb/d of Iranian exports, accelerating inventory draws, and delayed market normalisation from late April into mid-May, reinforcing a tighter global Oil balance.

Hormuz risks and Iranian export losses

“Following the breakdown of the Islamabad negotiations over the weekend, President Trump signalled a de facto move toward shutting the Strait of Hormuz. In practice, the Strait could evolve into a two-track system: one channel subject to Iranian transit or tolling measures, and another rendered effectively impassable by sea mines. US efforts would almost certainly focus on countering the latter, but even a successful response would fall well short of restoring normal operating conditions.”

“As a result, the conflict is likely to persist in the near term, keeping oil markets under sustained pressure. A halt to Iranian crude exports would remove an estimated 1.5–2.0 mb/d from global supply, accelerating inventory draws and driving prices higher worldwide.”

“Considering the blockade news, we increase the probability of our base case transitioning to the alternative scenario, in which market normalisation is pushed back from late April into mid‑May. In addition, we now allow for a further loss of Iranian barrels, which is incorporated into the scenario analysis below. Taken together—with adjustments for rerouting, SPR releases, demand destruction, and other offsets—the implied supply deficit (reflected in inventory draws) rises to 7.9mb/d in April and 6.1mb/d in May.”

“Returning to fundamentals, from an inventory perspective, the rapid drawdown in global stocks— which we estimate at more than 190 million barrels since the onset of the conflict—would accelerate further under a successful blockage. Global inventories currently stand at around 7.9 billion barrels, comprising roughly 6.2 billion barrels held on land and about 1.7 billion barrels afloat.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)