Oil prices fell sharply, with Brent and WTI dropping well below $100 after a two-week US–Iran ceasefire reduced fears of supply disruption. The reopening of the Strait of Hormuz also eased concerns, alongside weaker refined product markets and bearish US inventory data.
A preliminary Bloomberg survey said OPEC supply fell in March, down by around 7.6mb/d month-on-month to 22.1mb/d, a multi-decade low. The decline was linked to war-related disruption and curtailed exports through the Strait of Hormuz.
Opec Supply Drop And Gulf Disruptions
Iraq recorded the largest fall, down 2.8mb/d to 1.6mb/d. Saudi Arabia’s output dropped by 2.1mb/d to 8.4mb/d, while the UAE fell by 1.4mb/d to 2.2mb/d, partly supported by pipelines that bypass the strait.
If the Strait of Hormuz remains open, some lost production could return in the coming weeks, with a gradual recovery expected. Further price moves depend on whether talks lead to a durable agreement, with volatility expected during negotiations later this week.
In the US, the API reported a 3.7mb build in crude stocks versus expectations for a 0.78mb rise. Gasoline and distillate inventories fell by 4.0mb and 0.6mb, and the EIA report is due later today.
With the US-Iran ceasefire announced, the immediate sentiment for crude oil has turned bearish. The large 3.7 million barrel build in US crude stocks adds to this downward pressure, so we are watching for the official EIA data to confirm this trend. The key uncertainty is whether this two-week ceasefire translates into a lasting agreement, creating significant price risk in both directions.
Options Volatility And Trading Implications
Given the uncertainty surrounding the upcoming negotiations, we expect implied volatility in the options market to remain high. This presents opportunities for traders who anticipate large price swings if the talks succeed or fail. A failure of these talks could cause prices to snap back violently toward $100 per barrel.
The potential reopening of the Strait of Hormuz is the single most important factor, as roughly 20% of the world’s daily oil consumption passes through it. The reported March OPEC output of 22.1 million barrels per day was a massive drop from the 30-32 million barrel levels we saw as normal before 2025. This shows just how much supply could return to the market if the situation normalizes.
Looking back from 2025, we remember the price volatility during other geopolitical events, such as the initial conflict in Ukraine which sent Brent over $130 in 2022. This drop on ceasefire news is a similar pattern, but the risk of a sharp rally remains if diplomacy falters. Therefore, holding outright short positions is a high-risk strategy until there is more clarity.
The price drop is concentrated at the front of the curve, which could flatten the market’s backwardated structure and make calendar spread trades attractive. At the same time, falling inventories for gasoline and distillates suggest refining margins may strengthen. We see potential in buying crack spreads to capitalize on the relative strength of refined products over crude oil.
