Oil prices have been pulled in opposite directions by shipping security risks and producer supply plans. A US plan to escort ships through the Strait of Hormuz pushed oil down 2%, before prices rose 1.5% after further ship attacks.
Traffic through the strait has stayed low, averaging five vessels a day, with only three in the last 48 hours. ECB officials have warned about energy-driven supply shocks.
Strait Of Hormuz Risks
Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman held a virtual meeting to review global oil market conditions. They agreed a production adjustment of 188,000 barrels per day in June 2026, linked to easing the additional voluntary cuts first announced in April 2023.
The group said it would keep flexibility to change output levels, including reversing earlier cuts from November 2023. It also reaffirmed its commitment to market stability, full conformity with the Declaration of Cooperation, and compensation for any overproduction since January 2024.
Brent has been trading above $108 and WTI above $102. US economic data is being assessed alongside moves in oil prices.
We are seeing a classic tug-of-war in the oil market, which is driving significant price swings. With Brent crude trading above $108, the market’s fear gauge for oil, the OVX, is elevated near 45, indicating that traders are bracing for more volatility in the coming weeks. This environment suggests that price direction is less certain than the likelihood of large price movements themselves.
The geopolitical risk in the Strait of Hormuz cannot be overstated, as this chokepoint normally handles nearly 20% of the world’s daily oil consumption. The current flow of just five vessels a day is a fraction of its normal traffic, creating a significant risk of a price spike on any further escalation. We only need to look back to the drone attacks on Saudi facilities in 2019, which caused the biggest one-day price jump in 30 years, to understand the potential upside risk.
Opec Supply Plans
On the other hand, the plan by OPEC+ to add 188,000 barrels per day in June is a signal, but not a market-flooding event. This planned increase is very small when compared to the over 2 million barrels per day of voluntary cuts that producers had maintained since they were implemented through 2024 and 2025. Their emphasis on a “cautious approach” suggests a soft floor for prices, as they could quickly reverse course if demand weakens.
For traders, this suggests that buying volatility may be more prudent than making a simple directional bet. Strategies like purchasing straddles or strangles, which profit from a large price move in either direction, could be effective in capturing the fallout from either a supply disruption or a successful diplomatic resolution. Any direct futures positions should be managed with extremely tight stop-losses due to the headline-driven nature of the market.
Looking ahead this week, the U.S. Energy Information Administration (EIA) inventory data will be critical. In this tight market, a surprise drawdown in U.S. crude stocks would likely send prices sharply higher, amplifying the existing supply concerns. Conversely, a significant inventory build could provide temporary relief and test the resolve of bullish traders.
