Why oil prices stayed below $200 despite the biggest supply shock

Oil prices and the Hormuz blockage

Three months after the Strait of Hormuz was effectively sealed, oil prices have hovered under $100 a barrel, far from the $200 scenario many warned about.

Record U.S. crude exports, a sudden ↓ 40% plunge in Chinese imports, and a thin stream of cargoes still threading the strait have absorbed most of the shock from the loss of >10 million bpd of Middle Eastern supply.

“People thought it would be worse. $96 a barrel is nowhere near $300,” President Trump said Friday.

U.S. swing supply

Since February, American exports have risen by ↑ 2 million bpd, turning the United States into the world’s primary backup supplier. The Reuters data show May shipments topping the 2023 average.

China’s demand shock

Vortexa data indicate China cut inbound shipments by almost 40% in May, a reduction that offsets roughly a fifth of the lost Middle Eastern flow.

Analysts at Bloomberg note that China’s refinery runs are now around 13 million bpd, a level last seen in early 2020.

Strategic reserves and market tightness

Global stockpiles are being drawn at a pace not seen in two decades. Each week the system tightens by ↓ 70‑80 million barrels, eroding the buffers that have held prices in check.

“We cannot sustain these exports forever,” warned Greg Sharenow of Pacific Investment Management.

Outlook

The market’s next inflection point hinges on two variables: the resumption of regular Hormuz traffic and the speed at which China restores its crude appetite. Until then, oil prices are likely to stay well below the feared $200 mark, but volatility remains high.

Intel provided by Victor Hale (Equities & Market Dynamics Analyst).