Major benchmark crude oil prices rebounded sharply in global trading on June 1, halting a three-consecutive-day losing streak. Buying activity driven by geopolitical risk aversion surged across the market.

 

The front-month futures contract for US WTI Light Crude Oil settled at $90.18 per barrel, posting an intraday gain of 3.02%. It hit an intraday high of $90.72 and a low of $87.45, with amplified price volatility. North Sea Brent Crude Oil front-month futures traded at $93.25 per barrel, up 2.12% on the day and maintaining a firm trend, while key resistance levels moved gradually higher.

 

Spot crude oil in Asia and Europe followed the upward trend. Premiums for Middle Eastern crude expanded, widening regional price differentials. The market volatility index climbed notably, and short-term speculative capital has flowed back into crude oil futures.

 

 

The rally in oil prices is primarily fueled by intensifying geopolitical conflicts in the Middle East. The Strait of Hormuz, a vital global oil shipping lane, has nearly lost its operational capacity. Normally, around 200 oil tankers pass through the strait every day, yet the current daily figure has plummeted to roughly 19 vessels, causing a drastic drop in shipping efficiency.

 

The disrupted transportation routes have created a global daily supply deficit of over 10 million barrels, accounting for 10% of the world’s total daily crude demand. This shortage cannot be offset by alternative shipping routes in the short term.

 

Iran has suspended operations at Kharg Island, its primary crude export terminal. Multiple onshore oil wells and gathering & transportation facilities along the coast have also been temporarily shut down, bringing Iran’s crude exports to a virtual standstill. Tensions between Iran and the US continue to escalate. Senior Iranian military officials stated that no compromises will be made on core national interests, leaving diplomatic negotiations fully deadlocked. Fears over a broader regional military conflict have grown significantly.

 

Meanwhile, military confrontations between Israel and Lebanon have worsened. Israel has expanded its military operations inside Lebanon, raising the risk of conflicts spreading to the Eastern Mediterranean — a critical import hub for crude oil and refined products in Europe. The spillover of hostilities has pushed up the geopolitical risk premium and provided strong support for oil prices. Market analysts estimate the probability of a complete breakdown in Iran nuclear talks and a large-scale regional conflict has risen to 25%.

 

 

Data released by the International Energy Agency (IEA) and leading investment banks at end-May shows global crude oil inventories have declined continuously, triggering energy security alerts.

 

According to Goldman Sachs, global commercial crude stocks were equivalent to 101 days of global consumption at the end of April. The drawdown accelerated in May, with inventories falling to cover only 98 days of demand by month-end, dipping below the widely recognized 100-day safety threshold.

 

Counting only readily accessible visible stocks held at ports and storage tanks, the figure stands at just 73 days, the lowest level since 2018. The global crude inventory drawdown averaged 8.7 million barrels per day in May, hitting a record high for the month. Industry insiders noted that official book figures overstate actual stockpiles. Aging storage tanks and remote reserves face transportation difficulties and degraded oil quality, meaning effective available stocks are far lower than reported numbers.

 

The IEA issued a fresh warning: global crude supply outages caused by geopolitical strife, facility failures and transport disruptions have reached 13.7 million barrels per day, equal to 15% of total global demand and ranking as the second largest supply disruption on record. Facing tight energy supplies, 54 countries worldwide have declared energy emergencies and implemented emergency measures including energy conservation and refined products allocation.

 

 

Major changes have taken place within the OPEC+ alliance, reshaping the global crude supply landscape. The United Arab Emirates officially withdrew from OPEC on May 1, ending its nearly 60-year membership. Free from production quotas after exiting the organization, the UAE now has theoretical potential to ramp up output rapidly. However, regional unrest and blocked shipping lanes have stalled actual production growth, leaving it unable to fill the global supply gap.

 

Key Middle Eastern producers including Saudi Arabia, Iraq and Kuwait suffered severe production cuts in April due to the closure of the Strait of Hormuz and domestic logistics disruptions. The three countries combined cut output by 9.1 million barrels per day. Authorities confirmed that full production recovery will take 2 to 3 months, pending the full resumption of shipping and domestic transport networks.

 

Russia, a major non-OPEC+ oil producer, is also under supply pressure. Multiple domestic refineries sustained damage from attacks, leading to month-on-month declines in crude processing and exports. Shipping capacity in Russia’s Far East and Black Sea routes is limited. Even with increased export efforts, Russia cannot make up for the massive supply shortfalls from the Middle East, keeping the global crude market firmly in a supply-constrained state.

 

 

The surge in international crude prices has rippled through industrial chains, driving up refined product prices across the globe. Retail prices for gasoline and diesel have climbed repeatedly across the EU, with many regions hitting new yearly highs. Wholesale prices of oil products have also increased in major Asian consuming nations. Market participants widely expect retail refined fuel prices to rise in the next pricing adjustment round in June, which will push up operational costs for the logistics and transportation sectors.

 

Higher oil prices have intensified global inflationary pressures. As a fundamental commodity, expensive energy lifts costs across chemicals, transportation, manufacturing and other industries. Multiple international financial institutions have revised down global economic growth forecasts. Due to rising energy costs and weakened household consumption sentiment, the projected global GDP growth rate for 2026 has been cut by 0.5 percentage points.

 

Energy-import reliant emerging economies face mounting challenges, including widening trade deficits, weakening local currencies and elevated imported inflation, amplifying overall economic risks.

 

 

Major investment banks have updated their price forecasts. Based on current supply-demand fundamentals and geopolitical conditions, the medium-to-long-term fair value of Brent crude has been revised upward to $106 per barrel.

 

Geopolitical developments in the Middle East remain the dominant variable for market movements. If conflicts around Lebanon expand and Iran-US tensions further escalate, international crude prices are likely to break above $120 per barrel. Conversely, if relevant parties make progress in negotiations and shipping through the Strait of Hormuz returns to normal, oil prices will trend down after fluctuating at elevated levels.

 

In the short term, the crude market will see continued high volatility and choppy trading. Geopolitical news, tanker transit data, national inventory reports and policy moves from OPEC+ producers will be core market drivers. Meanwhile, persistently high oil prices will curb industrial and transportation fuel demand, acting as a cap on price gains. Intense battles between bulls and bears are set to continue in the period ahead.