EU Energy Outlook: Hormuz Volatility Drives Supply Tightness

Market Insight | 21 April 2026

I. Executive Summary & Market Highlights

The energy complex navigated a week of extreme price corrections and subsequent rebounds as brief diplomatic optimism regarding the Strait of Hormuz was met with renewed maritime escalations.

The “Hormuz Rollercoaster”: Crude and fuel prices collapsed sharply on April 17 following an Iranian announcement that the Strait of Hormuz would remain open during a ceasefire between Israel and Lebanon. However, sentiment shifted by April 20 as the US Navy’s seizure of the Iranian-linked vessel Touska triggered retaliatory threats, pushing prices back up and effectively closing the Strait once more.
IEA Demand Warning: The IEA forecasted a global demand contraction of 80,000 b/d for 2026, a significant reversal from its March prediction of growth, citing “demand destruction” from the ongoing conflict.

Refinery Outages: Middle Eastern refining capacity remains heavily constrained, with approximately 2.3 million b/d offline due to drone attacks and export bottlenecks at facilities including Kuwait’s Al-Zour and Saudi Arabia’s SAMREF.
Inventory Shifts: Commercial heavy distillate stocks in Singapore rose to a three-week high of 23.67 million barrels, while ARA fuel oil stocks ended a draw cycle, rising 5.6%.

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II. Brent Crude: Technical & Fundamental Analysis

The crude benchmark has transitioned from a record-breaking rally into a phase of volatile consolidation defined by steep backwardation.

Price Action: After hitting a peak of 144.42/b on April 7, Dated Brent eased to 99.26/b on April 17 following the temporary opening of Hormuz. By April 20, prices rebounded to $106/b as tensions flared.
Market Structure: Physical Dated Brent continues to trade at a massive premium, with backwardation reported at $24/b for prompt-week versus five-week-out deliveries.

III. Singapore Hub: Supply and Demand Review

The Asian hub remains the primary theater of supply anxiety, though a surge in Western imports has provided a temporary inventory cushion.

1. Supply Dynamics Commercial stocks of heavy distillates rose 8.94% week-over-week to 23.67 million barrels. This build was supported by a 16.4% jump in imports, notably from Brazil (120,271 mt) and the USA (57,596 mt). However, VLSFO arrivals from the West are expected to decrease in April to 1.4–1.5 million mt, down from 1.8–1.9 million mt in March.

2. Demand & Trade Activity Bunker demand remains firm, with March sales rising 6.6% year-over-year to 4.77 million mt, as Singapore serves as a critical staging ground for vessels rerouting around Africa. In the cargo market, April trades reached 400kt for HSFO 380cst and 220kt for Marine Fuel 0.5%, with Trafigura and Sietco acting as dominant sellers.

This import shift marks a structural evolution from the supply vacuum identified in Alkagesta’s 19 March report, where zero Western arrivals and an 80.5% collapse in Middle Eastern inflows created acute prompt scarcity.

Activity in the cargo market continues to reflect strong engagement from regional participants, including flows monitored across Alkagesta Singapore and Alkagesta Dubai operations.

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IV. Europe Market: Supply and Demand Review

European markets are bifurcated by ample local fuel oil supply but critical shortages in other segments like jet fuel.

1. Northwest Europe (NWE) & ARA Hub Fuel oil stocks in the ARA hub rose 5.6% to 702,000 mt, ending a four-week draw cycle. While physical supply is currently healthy, steep backwardation has made the arbitrage window to Singapore challenging. Traders describe HSFO demand in the ARA region as “ultra-low”.

2. Mediterranean (MED) & Feedstock Tightness The Mediterranean physical market remains tight as high freight rates and regional strikes in the Persian Gulf block traditional residue flows. Demand for 1% product is elevated as regional utilities maximize fuel oil consumption as a natural gas substitute ahead of the peak summer season starting in May.

The pressure on European jet fuel supply extends beyond refinery constraints. Alkagesta CEO Orkhan Rustamov stated an additional supply disruption during March and April: heightened military-grade jet fuel deliveries into the NATO Central Europe Pipeline System (CEPS) at Rotterdam displaced civilian volumes, reducing deliveries to major European airports including Frankfurt. The displaced volume is equivalent to several days of Italian jet fuel demand — a relatively small but significant additional burden on already squeezed European supply chains.

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V. USA Market: Supply and Demand Review

The US has solidified its position as the primary “swing supplier” for both the Atlantic and Pacific basins.

Export Dominance: US diesel shipments to Europe reached 2 million mt so far in April, a 44% increase from March levels.
Inventory Draws: Analysts expect US commercial crude stocks to draw by 3.3 million barrels to reach 460.5 million barrels.
Regional Premiums: Los Angeles CARBOB has spiked nearly 44% since the start of the war, while West Coast imports fell 140,000 b/d during the week.

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VI. Comparative Bunker Sales & Port Activity

While Singapore reported year-on-year gains, other major hubs faced a collapse in activity:

Fujairah: March bunker sales plummeted 71.4% month-over-month to a record low of 159,888 cubic meters as the blockade stranded vessels.
Zhoushan (China): Bonded bunker sales rose 32.9% month-over-month in March to 744,900 mt as ships sought alternative hubs.
Rotterdam: Total Q1 bunker sales reached 1.58 million mt, with HSFO comprising 619,010 mt of that volume.

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VII. Future Outlook

Short-Term Outlook (Next 24-72 Hours): Market participants are focused on the April 22 expiration of the US-Iran ceasefire. Unless diplomatic relations improve immediately, a resumption of bombing campaigns and renewed maritime skirmishes are anticipated. The seizure of the Touska has already nullified the “ceasefire discount,” and prices are expected to remain on a bullish trajectory as the blockade is strictly enforced.

Mid-Term Outlook (Q2 – Q3 2026):

Prolonged Recovery: Even if the Strait of Hormuz reopens permanently, restoring Middle East crude production will take five weeks to seven months due to damage to fields, pipelines, and infrastructure.
Demand Destruction: The IEA has slashed its 2026 demand forecast, predicting a contraction of 80,000 b/d due to high prices and conflict-related economic slowing.
Refinery Constraints: High feedstock costs and negative margins for light products are likely to trigger run cuts at European and Japanese refineries by May, further tightening global fuel balances through the third quarter.

Alkagesta teams across Malta, Geneva, Dubai, Singapore, Turkiye, UK, and Romania continue to monitor developments in real time.

Disclaimer

This insight reflects Alkagesta’s views on historical developments and potential future trends in energy markets, demand, and supply dynamics. The analysis is based on Alkagesta’s internal assessments and publicly available information from a variety of external sources. Certain numerical data referenced in this insight is derived from or informed by information published by S&P Global Platts, including the Platts Long-Term Oil Demand Outlook.

This insight may contain forward-looking statements, including projections, expectations, estimates, and assumptions regarding future developments. Actual outcomes may differ materially from those expressed or implied due to a range of factors beyond Alkagesta’s control, including changes in economic conditions, technological developments, regulatory or policy changes, geopolitical events, shifts in energy demand and supply, or other market developments.

The information provided is for general informational purposes only. While Alkagesta believes the information is derived from reliable sources, no representation or warranty is made regarding its accuracy or completeness. Alkagesta assumes no obligation to update or revise any statements or information contained herein.

About Alkagesta

Alkagesta is a global commodity trading house specializing in petroleum and steel products, fertilizers, and biofuels. Established in Malta in 2018, the company operates as a multinational enterprise with 17 offices and representations worldwide. Alkagesta maintains partnerships with 28 international banks and conducts trading activities across 48 countries, facilitating approximately 9 million metric tons of commodity flows annually. Its extensive logistics network includes access to more than 700,000 cubic meters of storage capacity across Europe and Asia, supporting efficient and resilient global supply chains.

The company offers fully integrated trading capabilities — from sourcing and storage to delivery — underpinned by robust risk management, compliance, and governance frameworks.

Alkagesta was founded in 2018 by its management team and remains privately held and governed by senior leadership. Senior leadership, including the founding team, holds a significant equity stake in the company, which continues to grow in alignment with performance and strategic contribution. Today, the Group employs over 165 professionals and is built on tested systems, experienced governance, and a culture of continuous development.

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