What’s Keeping Oil Prices Relatively Low?

TL;DR

The closure of the Strait of Hormuz has removed roughly 13 million barrels per day of oil production capacity from the market, with cumulative unproduced oil expected to approach 1 billion barrels by mid-2026.
Despite this significant supply shock, crude oil prices have not reacted more forcefully due to a recent ceasefire, White House interventions aimed at lowering prices, and the market's difficulty pricing risk before physical scarcity occurs.
The market's pricing mechanism is reacting to realized inventory drawdowns rather than anticipating future scarcity, with price pressure manifesting primarily in the spot market and front of the futures curve.
The United Arab Emirates announced its departure from OPEC, a significant development that will increase Saudi Arabia's dominance within the group and potentially lead to further defections.
President Trump extended waivers for the Jones Act, which could help offset domestic energy price shocks by allowing for more efficient movement of petroleum products between U.S. ports.

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