MW Oil prices turn lower on hopes for Iran deal; crude supplies are declining as travel season starts Memorial Day weekend
By Joy Wiltermuth and Nora Redmond
The flow of oil through the Strait of Hormuz is 95% below regular levels, says Goldman Sachs
Wall Street is weighing the odds of the Iran war ending as global supplies deplete and Memorial Day kicks off the summer driving season.
Oil prices turned lower Thursday, with the rapid depletion of global crude stocks in focus - but there's no relief in sight just yet.
Physical supplies of oil are continuing to tighten, with exports through the Strait of Hormuz 95% below normal levels, according to analysts at Goldman Sachs led by senior commodities strategist Yulia Zhestkova Grigsby.
The Goldman team estimated that total oil loadings from Iran have fallen to close to zero across the past seven days, down from an average of 2.5 million barrels per day last year, in a note published Wednesday.
More broadly, the world has been losing an estimated 14 million barrels of Persian Gulf crude supply every day of the Iran war, or about 400 million barrels a month, said Pavel Molchanov, investment-strategy analyst at Raymond James, on Thursday.
"That is why we are seeing inventories around the world declining," Molchanov said. It's also why there has been "a lot of emotion" driving oil prices, likely including Wednesday's roughly 6% drop following what seemed like optimistic comments from the White House about a potential resolution to the war.
Oil prices rose early Thursday in New York trade, but were lower in afternoon trade as Wall Street weighed the odds of President Donald Trump ending the Iran war.
"These daily moves, they go down too much and then they go up too much," Molchanov said. "This intensity of emotion reflects the uncertainty in the market."
Yet the supply-and-demand imbalance continues to underpin oil prices. West Texas Intermediate crude's July contract - the most active - was down about 1% to about $97 a barrel, after climbing as high as $102.66 (CL.1) (CLN26) early Thursday. It was closer to $65 a barrel before the U.S. and Israel started the war in late February.
Brent crude futures for July delivery was off about 1.4% to $103.66 a barrel, after advancing as high as $109.30 a barrel (BRN00) (BRNN26) early Thursday.
The move higher came after Reuters reported that Iran's Supreme Leader said enriched uranium must remain in the country. The report was later disputed. President Trump said again on Thursday that the war with Iran war will end "very soon," while speaking from the Oval Office. He also repeated that Iran can't keep highly enriched uranium.
"In our book, crude needs to break $80 before we can entertain a potentially durable decline, until then knee-jerk reactions are likely," Jeff deGraaf, founder of Renaissance Macro Research, wrote in a Thursday morning client note.
Meanwhile, U.S. crude stockpiles have declined for the fourth consecutive week, with inventories down 7.9 million barrels in the week ended May 15, per data collected by the U.S. Energy Information Administration.
Even if a deal emerges soon to reopen the Strait of Hormuz and shipping traffic is normalized in July, the cumulative supply loss from the first day of the Iran war is likely to be around 1.5 billion, according to Molchanov at Raymond James.
For perspective, the historic release of 400 million barrels agreed to in March from global strategic reserves would cover only about one-quarter of the lost supply.
All this supply crunch is occurring just as the U.S. travel season is due to begin this weekend - a seasonal phenomenon that is likely to boost demand for gasoline, diesel and jet fuel.
Physical Brent prices remain significantly lower than their early-April highs mainly because of releases of emergency stockpiles of oil by the International Energy Agency and a lack of demand for Chinese crude, with imports plunging by 38% since the war started, driven by a lack of movement in the Persian Gulf and fewer exports to Russia.
"One of the points we've made throughout the war is that the White House's decision-making will be influenced by domestic politics," said Molchanov. "They see the same polling we all see - they can see the war is not popular among the American public."
Furthermore, anxiety from American voters about the cost of living, including high gasoline prices, will likely be a consideration heading into the midterm elections. "That is going to play into the White House's approach to ending the war," Molchanov said.
Taylor Rogers, a White House spokesperson said Trump "remains committed to fully unleashing American energy dominance, lowering costs, and putting more money back in the pockets of hardworking American families," in a statement to MarketWatch.
Trump also expects gas prices to "plummet back to the multiyear lows" once the conflict ends.
Robert Schroeder contributed
-Joy Wiltermuth -Nora Redmond
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May 21, 2026 14:02 ET (18:02 GMT)
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