Crude outlook: Brent below $100, but risks persist as disruption lingers

Global oil prices have retreated meaningfully in April after an extraordinary surge earlier this year, with Brent futures down more than 12 per cent month-to-date (M-T-D) and trading below $100 per barrel. The pullback follows the US–Iran ceasefire initiated on April 7 and subsequently extended indefinitely, easing immediate fears of an outright regional escalation.

 

However, despite the correction, oil prices remain elevated compared with pre-conflict levels of $60–70 per barrel, underscoring the depth of damage inflicted on global supply chains. Brent is currently trading around $96 per barrel, well below the $120+ per barrel peaks seen in early March and early April, but still reflecting an unprecedented disruption to global energy flows.

 

 

Strait of Hormuz blockade: An unprecedented supply shock

 

The underlying stress in the global crude market remains severe. Roughly 10 million barrels per day (mbpd), or nearly 10 per cent of global oil supply, is estimated to remain offline in mid-April due to the effective closure of the Strait of Hormuz (SoH). At the height of the conflict, the blockade halted close to 20 per cent of global seaborne crude and refined product trade, making this the largest supply disruption in oil market history.

 

The ceasefire has still not seen the normalcy resuming in the Strait, which raises concerns for demand destruction in the coming months as the scarcity has yet to fully materialise. Higher prices and regional shortages have begun to bite, but consumption across key industrial sectors has so far proven more resilient than initially feared.

 

Physical market eases, but backwardation persists

 

One of the most notable developments this month has been the sharp narrowing of the spread between physical Dated Brent and ICE Brent futures. During the peak of the conflict in March, physical premiums surged to $35–40 per barrel, with Dated Brent reportedly exceeding $130 per barrel at times, while prompt futures traded below $100 per barrel.

 

That gap has since narrowed as inventory drawdowns, partial resumption of flows, due to sanctions waivers, and a record IEA-coordinated emergency stock release provided short-term relief. The convergence signals an easing of acute physical tightness, though the forward curve remains deeply backwardated, highlighting continued sensitivity to any geopolitical setback.

 

Inventories drain as IEA taps emergency stocks

 

The conflict has erased an estimated 7–9 mbpd of effective supply during peak months, with April losses likely exceeding March, according to the International Energy Agency. To counter the shock, IEA member states released a record 400 million barrels from emergency stockpiles starting in March—the largest coordinated drawdown on record.

 

The US contributed 172 million barrels from its Strategic Petroleum Reserve (SPR), alongside significant involuntary draws from commercial inventories worldwide. While these measures have softened near-term scarcity, visible global stocks have fallen sharply, limiting the scope for further buffers.

 

GCC output curtailed despite spare capacity

 

Oil production across the Gulf Cooperation Council (GCC) has been heavily constrained due to the conflict. In April, shut-ins of 5–7 mbpd are estimated for Saudi Arabia, the UAE, and Kuwait alone due to export bottlenecks and infrastructure risks.

 

Although OPEC+ announced a modest voluntary increase of 206 thousand barrels per day ( kb/d) for April and May, this adjustment remains largely symbolic, as Gulf producers are unable to move incremental barrels through Hormuz. In March, OPEC crude oil production plummeted by 7.5–7.9 million barrels per day (mb/d) month-on-month to around 22 mb/d, the largest monthly decline in decades, exceeding losses during the 1970s oil crises.

 

Russia emerges as a major beneficiary

 

In contrast, Russia has quietly emerged as a key beneficiary of the crisis. Russian oil export revenues surged in March, with total exports rising to 7.1 mb/d, up 320 kb/d from February. Crude production edged higher to 8.96 mbpd, defying expectations.

 

China increased its intake of Russian barrels amid Middle East disruption, while a US sanctions waiver enabled India to lift Russian imports by 50 per cent, reaching a record 2.25 mb/d—nearly half of India’s total crude imports in March, even as overall imports fell. 

Short-term outlook: Volatile, with a softer bias

 

Looking ahead, oil prices are expected to remain highly volatile, but with a gradual downside bias if the ceasefire holds and Hormuz traffic improves. Brent is likely to test the $90–100 per barrel range in the coming weeks. A sustained reopening of Gulf flows could push prices toward $80 per barrel by late Q2, though structural tightness and geopolitical risks argue against a rapid return to pre-war norms. In short, the worst of the panic may be over but the oil market remains far from healed.

 

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(Disclaimer: This article is by Mohammed Imran, research analyst, Mirae Asset Sharekhan. Views expressed are his own.)