03-06-2026

Executive Summary

Crude oil prices surged above $95 per barrel as escalating Middle East tensions and uncertainty over U.S.–Iran peace talks kept markets highly volatile. While military activity between both sides raised concerns over supply disruptions, hopes for a diplomatic resolution prevented a sharper rally. At the same time, a sharp 6.8-million-barrel decline in U.S. crude inventories highlighted tightening supply conditions, providing additional support to oil prices. Overall, geopolitical risks and falling inventories remained the key drivers of the crude oil market throughout the week.

03-06-2026

Why the Strait of Hormuz Matters to Global Oil Markets?

The Strait of Hormuz remains one of the world`s most strategically important energy corridors, handling nearly 20 million barrels of crude oil and petroleum products per day, which accounts for around 20% of global oil consumption and almost one-third of global seaborne oil trade. The route is also critical for LNG exports, carrying roughly 20% of global LNG shipments, mainly from Qatar and the UAE.

Any prolonged disruption in the Strait could significantly impact global energy flows, leading to higher crude oil prices, increased shipping and insurance costs, and delays in global supply chains. Analysts estimate that a major disruption could push oil prices sharply higher as import-dependent economies compete for alternative supplies. Countries across Asia, including India, China, Japan, and South Korea, are particularly exposed due to their heavy reliance on Middle Eastern energy imports.

Beyond the energy sector, higher oil and transportation costs could increase inflationary pressures, raise import bills, and slow economic growth in vulnerable economies. As a result, developments around the Strait of Hormuz remain one of the most closely watched geopolitical risks for global commodity and financial markets.

03-06-2026

Geopolitical Events

v  U.S.–Iran Negotiations Keep Markets Volatile

Crude oil markets remained highly sensitive to developments between the United States and Iran throughout the week. Reports suggested progress toward a potential 60-day ceasefire agreement, raising hopes for reduced tensions and the gradual normalization of oil flows from the Middle East. Discussions reportedly included sanctions relief, uranium controls, and the reopening of key shipping routes. However, conflicting statements from both sides and unresolved issues prevented a final breakthrough, keeping uncertainty elevated and maintaining a geopolitical risk premium in crude oil prices.

v  Russia–Ukraine Conflict Reshapes Russian Oil Flows

The Russia–Ukraine conflict continued to impact global energy markets as Ukrainian drone attacks targeted several Russian refineries, reducing domestic refining activity. As a result, Russia increased crude oil exports through its western ports by nearly 15% in May, reaching around 2.5 million barrels per day, the highest level in eight months. While stronger exports helped offset some refining losses, the continued attacks highlighted the vulnerability of Russia`s energy infrastructure and kept concerns over potential supply disruptions alive. Any further escalation could increase market volatility and influence global crude oil trade flows.

v  China Demand Concerns Weigh on Oil Prices

China`s oil demand remained a key concern for the market, with crude imports falling nearly 20% and refinery throughput declining by around 5.8% year-on-year. The slowdown reflects weaker industrial activity and softer fuel consumption, limiting some of the bullish momentum created by geopolitical tensions and supply risks. As the world`s largest crude importer, China`s demand outlook continues to play a crucial role in shaping global oil prices.

03-06-2026

Inventory Analysis

Over the last three inventory reports, U.S. crude oil stockpiles have shown a clear tightening trend. Inventories moved from -4.3 million barrels on May 13 to -7.9 million barrels on May 20, indicating strong demand or lower supply availability. The latest report showed a smaller draw of -3.3 million barrels, but it still remained well below zero, suggesting that crude inventories continue to decline rather than build.

This consistent inventory drawdown has been one of the key reasons why crude oil prices have remained supported despite concerns over global demand. In simple terms, the market has been consuming more crude oil than what is being added to storage, which is generally a bullish signal for prices.

Today’s Inventory Expectations

Previous                           Forecast

-3.3 Million                      -2.9 Million

Market Narrative

The market is currently balancing two major stories: falling U.S. inventories and easing geopolitical tensions around U.S.–Iran negotiations. Today`s inventory data could act as the next major trigger. A strong drawdown would reinforce the bullish supply story, while a weaker number could strengthen the recent corrective move in crude oil prices.

03-06-2026

Joint Statement by Heads of the International Energy Agency, IMF, WTO and World Bank Group.

The joint statement from the heads of the International Energy Agency, International Monetary Fund, World Bank Group, and World Trade Organization was primarily focused on assessing the economic and energy-market consequences of the ongoing Middle East conflict and coordinating international support measures. The organizations noted that global oil inventories are being depleted at a record pace to offset lost supply. If shipping disruptions persist, inventory drawdowns could accelerate further just as Northern Hemisphere summer fuel demand peaks, increasing the risk of tighter oil markets, fuel shortages, and heightened price volatility.
The four institutions agreed to closely monitor energy markets, fertilizer supply chains, and government policy responses while coordinating international efforts to support affected countries and preserve global economic stability.

03-06-2026

IEA Outlook

Toril Bosoni, Head of Oil Industry & Markets at International Energy Agency has warned that global oil inventories could fall to critically low levels ahead of the Northern Hemisphere`s peak summer demand season as stockpiles continue to decline amid ongoing disruptions to the Strait of Hormuz. The agency noted that even if a geopolitical agreement were reached immediately, a full restoration of shipping flows through the Strait could take six to eight months. With Hormuz tanker traffic still restricted, cumulative oil supply losses from producers in the middle East now exceed 1 billion barrels, with more than 14mb/d of oil production shut in.

Meanwhile, Abu Dhabi National Oil Company expects Hormuz transit to remain below pre-conflict levels well into 2027, warning that August could become a key inflection point for higher oil prices if demand recovers while supply disruptions persist. Despite limited tanker movements through the Strait and efforts by ADNOC to expand alternative export routes, supply-chain constraints remain significant. Amid disruptions to shipping through the Hormuz Strait caused by the Iran conflict, the UAE is taking steps to secure its oil and fuel exports. ADNOC is developing a new pipeline that will allow gasoline, diesel, and jet fuel exports to continue without relying on the strait.

03-06-2026

OPEC Outlook 

On 3rd May 2026, the seven OPEC producers held a ministerial review meeting and reinteriated there commitement to maintain oil market stability. The group approved a modest june production quota increase of about 188,000 barrels per day, while emphasizing flexibility to respond to changing market condition.

OPEC revised its 2026 global oil demand growth forecast lower to 1.17 million barrels per day, reflecting the impact of elevated energy prices, economic uncertainty, and consumption pressures arising from Middle East tensions. The June 7 OPEC+ meeting will be the key event for traders, with any signal on production policy, inventory concerns or Middle East supply disruptions likely to influence Brent and WTI price direction over the coming weeks. OPEC has a Neutral-to-Bullish for crude in the near term, supported by tight inventories and supply-side risks despite softer demand expectations.

03-06-2026

Technical Analysis

COMEX Crude Oil:

Crude oil has recently confirmed an Inverse Head & Shoulders breakout, a widely followed bullish reversal pattern that often indicates the end of a corrective phase and the beginning of a fresh upward trend. Following the breakout, prices witnessed a sharp rally, suggesting that market sentiment has shifted in favor of buyers.

However, after such a strong move, it is common for prices to revisit the breakout zone before resuming the trend. In this case, the $95 level could act as an important retracement and accumulation zone where fresh buying interest may emerge. A successful hold above this area would strengthen the bullish structure and indicate that the breakout remains valid.

From a broader perspective, the $86 level remains a crucial support zone and serves as the key level that protects the current bullish outlook. As long as crude oil sustains above this support, the overall trend is likely to remain positive. If buyers continue to dominate near the retracement zone, prices could gradually move toward the $103 resistance area, which represents the next major upside objective based on the current chart structure.

Key Levels

·      Pattern: Inverse Head & Shoulders Breakout

·      Accumulation Zone: $95

·      Major Support: $86

·      Upside Target: $103

03-06-2026

Details of Research Analyst