During the May Day holiday, the international crude oil market experienced volatile trading conditions. Ongoing escalation of geopolitical conflicts in the Middle East, near standstill of shipping through the Strait of Hormuz, and a sharp contraction in global crude oil supply have intensified price swings. Additional factors include stalled U.S.-Iran negotiations and challenges in implementing production increases by major OPEC+ oil producers.
On May 6, international oil prices plunged during trading hours following signs of easing Middle East tensions. At one point, WTI crude and Brent crude prices fell by more than 10%. When domestic futures night trading opened, SC crude opened sharply lower, with the main contract dropping over 5%. By the close, the June WTI crude futures contract on the New York Mercantile Exchange fell by $7.19 per barrel to settle at $95.08, a decline of 7.03%. The July Brent crude futures contract on the London exchange dropped by $8.60 per barrel to close at $101.27, down 7.83%.
Reports indicate that U.S.-Iran negotiations aimed at ending the conflict have advanced to a one-page memorandum of understanding covering 14 points, marking the closest the two sides have come to an agreement. The U.S. is expected to receive Iran’s formal response on several key issues within the next 48 hours. Under the proposed plan, the one-page memo would announce an end to regional conflict and open a 30-day window for formal talks on nuclear issues, Strait of Hormuz navigation, and sanctions relief. Iran stated it is currently "evaluating" the 14-point peace proposal put forward by Washington. Pakistan, acting as an intermediary, suggested that behind-the-scenes talks show promise and may yield tangible results.
Subsequently, the U.S. President reiterated that if Iran does not agree to the terms, military action could follow, adding that it is still "too early" to sign a peace deal. Following these remarks, oil prices pared some losses.
According to Sui Xiaoying, chief petrochemical researcher at Founder Midterm Futures, uncertainty remains over the direction of U.S.-Iran relations. Whether the two sides can reach a consensus on a ceasefire is still in question. Short-term news continues to cause persistent disruptions in oil price trends, making market direction unclear and trading difficult. She advises a cautious approach.
Yang Guangxi, senior energy and chemical analyst at Huawen Futures Research Institute, noted that competition for control of the Strait of Hormuz continues between the U.S. and Iran. While the likelihood of large-scale conflict remains low, the risk of ongoing friction persists.
Du Bingqin, head of energy and chemical research at Everbright Futures, analyzed from a fundamental perspective that global visible petroleum inventories stood at approximately 7.864 billion barrels before the holiday, down 255 million barrels since the onset of Middle East tensions. This consumption accounts for nearly 50% of projected 2025 inventories, with floating storage nearing low levels. Even if the Strait of Hormuz fully reopens, logistical constraints such as tanker transit times and pipeline speed limits mean supply recovery will be gradual. Global oil inventory drawdowns may continue into May or beyond.
She estimated that if Persian Gulf production recovers to 70% by mid-year and 90% by year-end, total supply losses could reach 183 million barrels, with potential permanent capacity reductions of 500,000 barrels per day.
Notably, prior to the holiday, domestic energy and chemical sectors strengthened due to Middle East tensions. According to Yang Guangxi, some energy and chemical products may see risk premiums unwind after the holiday, leading to short-term weakness across the sector. However, supported by cost factors and ongoing supply tightness, further strength remains possible in the medium term.
Specifically, crude-related products such as fuel oil, LPG, and asphalt, along with downstream derivatives including pure benzene, styrene, polyester, and olefin products, as well as methanol and ethylene glycol—which are heavily influenced by Middle East supply disruptions—may experience an initial decline followed by a rebound.