Page 31 - Policy Economic Report - April 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Oil Market

Crude oil price – Monthly Review

The resumption of flows through the Strait of Hormuz remains the single most critical factor in alleviating
pressure on energy supplies, prices, and the global economy. The latest development in this rapidly
evolving situation is the announced US blockade on vessels entering or departing Iranian ports and coastal
waters, which was scheduled to take effect shortly. In early April, shipments through the Strait remained
severely constrained, with loadings of crude oil, natural gas liquids, and refined products averaging
approximately 3.8 mb/d, compared with more than 20 mb/d in February prior to the crisis. Exports
through alternative routes including the west coast of Saudi Arabia, Fujairah on the UAE’s east coast, and
the ITP pipeline connecting Iraq to Ceyhan in Türkiye had increased to 7.2 mb/d, up from less than 4 mb/d
before the conflict. Overall, the disruption has resulted in a loss of more than 13 mb/d in oil exports.
Combined with associated production curtailments and damage to regional energy infrastructure, this has
led to cumulative supply losses exceeding 360 mb in March, with losses projected to surpass 440 mb in
April.

Consumers and refiners alike are tapping into oil inventories to mitigate the immediate impact of supply
disruptions. In March, global observed oil stocks fell by 85 mb despite an accumulation of both on-land
and offshore inventories in the Middle East and further builds in China. The largest decline came from oil
on water following the near halt to sailings from Gulf producers dependent on the Strait. Crude oil stocks
in importing countries in Asia dropped by 31 mb, with further declines expected in April. Where oil
inventories could not bridge the gap, demand has taken a hit. Most notably, Asian petrochemical
producers have curtailed operating rates as feedstock supply dried up. Households and businesses using
LPG have also been impacted, while flight cancellations across the Middle East, parts of Asia and Europe
have led to a sharp drop in jet fuel consumption. A growing number of countries have implemented
policies to reduce demand, while others have put in place measures to shield consumers from the full
impact of rising fuel prices. Overall, global oil demand is estimated to contract by 800 kb/d year-on-year
in March and by 2.3 mb/d in April.

Hedge funds and other money managers turned increasingly bullish on oil in March, sharply increasing
their net long positions amid large supply disruptions and rising oil prices, given the escalating geopolitical
tensions. ICE Brent net long positions rose to their highest level since October 2018, accompanied by
substantial financial flows into futures contracts for both ICE Brent and NYMEX WTI. Net long positions in
the two contracts increased by about 38% in March, with speculators buying an equivalent of 152 mb.
The sharp rise in oil futures prices prompted speculators to close more short positions as they managed
their previous bearish bets, while others accumulated additional long positions.

Crude spot prices rose sharply in March, supported by disruptions to crude and petroleum product flows
and deteriorated regional shipping operations in Middle East. These developments tightened physical
markets and led to an increase in the demand for prompt crude replacement from other regions, such as
the Atlantic Basin, North Sea, Caspian, Mediterranean, and Asia-Pacific. A sharp rise in middle distillate
crack spreads across all main refining hubs added support to spot prices. The tightness in the physical
market was also reflected in the dislocation between spot and futures markets, which was seen in the
spread between North Sea Dated and ICE Brent. This spread jumped to a premium of $10/b on a daily
basis, and averaged a premium of $4.24/b in March, compared to a premium of $1.72/b in February. In
March, North Sea Dated and WTI front-month prices increased by $32.75/b and $26.74/b, m-o-m,
respectively, to average $103.84/b and $91.16/b. Dubai's front-month price rose by $59.99/b, m-o-m, to
average $128.25/b.

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