The Week in Oil : Crude Rallies on Fading Hopes for Imminent Middle East Deal

By Giulia Petroni

Here's a look at what happened in oil markets in the week of May 11-15 and what the focus is likely to be on in the days to come.

OVERVIEW: Brent crude, the international oil benchmark, is on track for a weekly loss of more than 7%, driven by fears that a deepening supply shock will ripple through the global economy. In afternoon European trading, Brent crude was around $108 a barrel, while West Texas Intermediate futures were above $99 a barrel.

MACRO: Stronger-than-expected increases in both U.S. consumer and producer prices fueled expectations that the Federal Reserve might need to raise interest rates in the near term. Meanwhile, bond yields continue to march higher. U.S. two-year and 10-year Treasury yields climbed to their highest levels since February and July 2025, respectively.

GEOPOLITICAL RISKS: At the end of a two-day summit with Chinese leader Xi Jinping, U.S. President Donald Trump said China agreed that the Iran war should end and ship traffic through the Strait of Hormuz be free. The summit, however, produced few concrete agreements, while prospects for a lasting peace deal with Iran remain remote.

"While the cease-fire holds, hopes for a swift reopening of the Strait of Hormuz have faded," analysts at Commerzbank said. Even when the Strait reopens, the market is expected to continue facing disruptions. According to the International Energy Agency, it would likely take at least two to three months to fully restore stable export operations and for production and refining activity to recover.

SUPPLY AND DEMAND: The IEA sharply downgraded its outlook for global oil demand, saying it now expects consumption to contract by 420,000 barrels a day this year. The agency's base-case scenario assumes shipping through the Strait of Hormuz gradually resumes from June, with demand growth returning to positive territory only in August.

OPEC lowered its forecast for global oil-demand growth this year to 1.17 million barrels a day from 1.38 million barrels previously, while the U.S. Energy Information Administration projects demand growth of about 200,000 barrels a day.

As supplies in the Gulf remain constrained, analysts say the focus is now switching to inventories. The EIA expects global oil stocks to decline by 2.6 million barrels a day on average in 2026--including a drop of 8.5 million barrels a day in the second quarter.

NEXT WEEK: With no agreement between the U.S. and Iran in sight, market participants are likely to focus increasingly on inventory trends. In the U.S., attention will center on the weekly oil inventory report, while in China investors will closely watch industrial production data. If Chinese refiners have maintained processing rates despite weaker crude imports, domestic crude inventories are also likely to decline, said Commerzbank.

Next week's economic calendar features the release of the minutes from the Federal Reserve's meeting, which will be closely watched for further clues on the policy outlook and the Fed's assessment of inflation risks. Market participants will also focus on PMI data, jobless claims and consumer sentiment.

Write to Giulia Petroni at [e-mail]

(END) Dow Jones Newswires

05-15-26 1104ET