Easing Talk Expectations Weigh on Oil Prices as Supply and Demand Outlook Weakens

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Summary:

Expectations for renewed U.S.–Iran talks are rising; the International Energy Agency sharply cuts this year’s oil demand and supply forecasts...

Key Highlights

1. U.S. Customs to begin tariff refunds on April 20

2. Iran considers a temporary suspension of shipping through the Strait of Hormuz

3. U.S. Vice President expresses optimism on progress in U.S.–Iran tensions

4. Rising expectations for U.S.–Iran talks push oil prices lower for a second straight day

5. IEA sharply lowers oil demand and supply forecasts, marking the first contraction since the pandemic

Detailed Developments

U.S. Customs to Launch Tariff Refunds on April 20

U.S. Customs and Border Protection announced on the 14th that it has largely completed the first phase of development for a new customs system feature to process large-scale tariff refunds to importers. Refunds are set to begin on April 20.

The agency plans to roll out the system in phases, with additional functionalities to be added later to handle more complex scenarios.

On February 20, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act does not authorize the president to impose broad tariffs. On March 4, the U.S. Court of International Trade further ruled that CBP must not apply tariffs under this act during customs liquidation.

As a result, tariffs previously collected under this law must be refunded.

Iran Considers Temporary Suspension of Shipping Through the Strait of Hormuz

According to sources, Iran is considering a temporary suspension of shipping through the Strait of Hormuz to avoid provoking a potential U.S. blockade and to prevent jeopardizing a new round of peace talks.

The move would aim to avoid immediate escalation at a sensitive diplomatic moment, as both sides coordinate arrangements for renewed face-to-face negotiations.

Rachel Ziemba, a senior fellow at the Center for a New American Security, stated that such a step would signal Iran’s willingness to de-escalate and avoid a return to full-scale conflict.

U.S. Vice President Expresses Optimism on Iran Situation

Sources indicate that Vice President J.D. Vance is expected to lead a potential second round of U.S.–Iran negotiations.

Special envoy Steve Witkoff and Jared Kushner are also expected to be involved. Donald Trump has tasked the trio with advancing a diplomatic solution and continues to maintain contact with Iran and intermediaries.

While discussions are ongoing within the U.S. regarding a second round of talks, no final decision or timeline has been set.

Vance stated that he is optimistic about current progress but acknowledged that deep mistrust between the two sides cannot be resolved overnight.

Oil Prices Extend Decline on Rising Talk Expectations

Oil prices continued to fall on Wednesday. Brent crude dropped 1.1% to $94.10 per barrel, while WTI fell 1.2% to $90.13, having earlier touched a low of $86.96.

Markets are pricing in the possibility of renewed U.S.–Iran negotiations, which could eventually release oil supplies currently constrained by the Strait of Hormuz disruption.

Trump indicated that talks could resume in Pakistan within the next two days. Officials from the Gulf region, Pakistan, and Iran also suggested that delegations may return to Islamabad later this week, though no exact date has been confirmed.

Despite improving expectations, the situation remains fragmented, and markets continue to price in supply disruption risks rather than a return to balanced supply and demand.

Meanwhile, the U.S. blockade of Iranian ports remains in place, and a 30-day sanctions waiver on Iranian oil shipments is set to expire later this week without extension.

IEA Slashes Oil Demand and Supply Forecasts

In its April report, the IEA sharply revised down global oil demand and supply growth forecasts for this year.

Demand is now expected to decline by 80,000 barrels per day, while supply is projected to fall by 1.5 million barrels per day. In contrast, the March report had forecast demand growth of 640,000 barrels per day and supply growth of 1.1 million barrels per day.

This marks the first contraction since the 2020 pandemic.

The IEA noted that disruptions in Middle Eastern oil supply and the resulting pressure on the global economy are expected to push both supply and demand below 2025 levels.

By early April, flows of crude oil, refined products, and LNG through the Strait of Hormuz had dropped to around 3.8 million barrels per day, down more than 80% from over 20 million barrels per day before the crisis. The Strait previously accounted for roughly 20% of global oil supply.

Oil prices recorded their largest monthly increase on record in March. At the time of the report, North Sea spot crude was trading at around $130 per barrel, about 60% higher than pre-conflict levels.

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