Every week, I summarize and analyze developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely—including our ongoing tracking of shipping flows throughout the Middle East.

Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

For more public oil market context, check out my appearances on War on the Rocks’ Warcast (audio), The Financial Times’ Economics Show with Soumaya Keynes (audio), and Real Vision’s Geopolitical Edge (video).

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

Summary

Flat Prices rose nearly $7/bbl for Brent crude to end the week around $117/bbl, higher than all but two daily closes in March and April, as markets begin to price in the expectation of kinetic reescalation after the US midterm elections and, more broadly, the messy reality of this “new normal”.

Timespreads saw prompt backwardation steepen across all major crude benchmarks as Brent and Dubai saw prompt premiums rise by two-thirds to around $5/bbl and Brent DFLs nearly double to nearly $10/bbl; WTI prompt backwardation only rose ~50c to $2.50/bbl, albeit after an especially explosive November contract settlement on Tuesday that briefly spiked to $9/bbl.

Inventories data confirmed across-the-board headline draws for the US, Singapore, and ARA Europe, with all three regions showing all major product categories at or below trailing 5-year seasonal lows.

Refined Products pulled back as diesel eased to still-absurdly-high levels following news of a release from the US Northeast heating oil reserve and a welcome build in US weekly stocks; similarly, gasoline crack spreads fell to the lowest level since the beginning of the Iran War and within a few bucks of the seasonal average.

Market Positioning data confirmed that speculators were modest net buyers of crude over the past week-through-Tuesday, though that increase in net position was driven overwhelmingly by the ongoing capitulation of gross shorts.

As Well As real geopolitical risk premium returning to the barrel, Iran War looks set to re-escalate after US midterm elections, Saudi-Houthi war also continues to worsen, and Chinese crude oil imports tentatively recover to 2025 levels and help maintain bid for crude despite rising Middle Eastern export flow.

What Happened This Week

Read more

Our latest contribution to the Dispatch Energy newsletter, Donald Trump’s Diesel Desperation, is reprinted in full below. You can also listen to the story via the recorded voiceover.

Note: This piece was originally published on Tuesday, October 20th. Since publication, the White House has also offered to tap the Northeast Heating Oil Reserve and Moscow has said that the first cargo of Russian diesel will soon leave for the US in an obvious political favour. Both these developments will be further discussed in tomorrow’s Oil Context Weekly report but I wanted to flag here given the ongoing tracking of Trump’s diesel desperation.

A petrol station in London, United Kingdom. (Photo by Bryn Colton/Getty Images)

Welcome to Dispatch Energy! U.S. wholesale diesel prices are near all-time highs at more than $200 per barrel, while American voters face average retail diesel pump prices above $6 per gallon. With the midterm elections just weeks away, this is a catastrophic electoral reality for incumbent Republicans given the wide body of research confirming the negative relationship between gasoline pump prices and the approval and electoral success of the party in power; there has been less research on diesel, specifically, given that until recently that wasn’t the epicenter of fuel crises. Now, diesel’s importance to farming—and, more importantly, farm states’ importance to the balance of congressional control in 2026—is at the forefront of this midterm election cycle.

It’s therefore unsurprising that the White House is getting increasingly desperate as Election Day draws near. The Trump administration is pulling every available lever to bring those diesel prices down: from threatening export bans and browbeating Europe into releasing emergency stocks to pursuing tax loopholes and, most recently, striking a diesel supply-for-sanctions-relief deal with Russia. But these interventions are rounding errors in the scale of the current crisis. At best, the White House is providing a list of policy interventions for embattled Republican candidates to avoid taking the blame for high pump prices. Let’s review.

A Diesel Dilemma

Let’s first understand our current, historic diesel supply crisis. In total, seaborne exports from the world’s largest suppliers are down between 1 million and 1.5 million barrels per day (bpd) this year, compared with global demand of roughly 30 million bpd. Despite President Donald Trump’s claim that “The World’s Diesel price rise is mostly caused by the Russia/Ukraine War, not Iran,” the Iran war, along with the broader Middle Eastern security crisis, remains the largest driver of the rout in seaborne diesel exports. At the same time, Russia’s invasion of Ukraine and Kyiv’s recent strategy of striking Russian refineries have undoubtedly contributed materially to the diesel supply crunch.

The largest supply loss is in the Middle East, where refined product exports remain below half their prewar levels. The flow of crude oil through the Strait of Hormuz had risen markedly through September but dropped slightly in October on the back of the largest string of shipping attacks thus far. Part of the asymmetric recovery—between refined products and crude oil—stems from the logistical realities of the clandestine crude oil trade; high shipping and insurance costs favor the largest category of tanker, which typically carries crude. More structurally, there is evidence of damage to Middle Eastern Gulf refineries as well as growing losses of Saudi Red Sea refined product exports due to Houthi attacks on Saudi processing facilities.

In addition, Ukrainian attacks on Russia’s refinery fleet have collapsed Russian exports of diesel and gasoil (a related middle distillate product). Ukraine has focused on Russia’s energy sector infrastructure in an effort to bring Moscow’s war back to the Russian homeland, with sophisticated drone and missile attacks hobbling major oil-exporting ports, fuel depots, tankers, and, most importantly, oil refineries. Russia is normally the world’s second-largest exporter of diesel and gasoil, but those exports have been throttled from just under 1 million bpd to a trickle of barely over one-tenth of that flow today.

A Russian domestic supply crisis has dragged on foreign shipments. The collapse of Russia’s domestic fuel supply has sparked domestic shortages and long gas lines reminiscent of the U.S. experience through the oil shocks of the 1970s (or, closer to home, Soviet-era lines for almost everything). Moscow moved to ban the international sale of gasoline, jet fuel, and, finally, diesel, closing the export door almost entirely (although a very small volume of exports continued despite the announced ban).

Trump has wrongly attempted to shift most of the blame for high diesel prices onto Ukraine’s refinery strategy. On the other hand, Ukraine’s defenders similarly overstate their case when they argue that the refinery attacks have had no effect on global fuel prices—the loss of substantial volumes of Russian diesel supply has undoubtedly further tightened the market for the industrial fuel.

More broadly, diesel demand has proved stickier and harder to destroy than gasoline consumption. Prices have been pushed to record levels: New York Harbor diesel futures prices hit an all-time high of nearly $230 per barrel in September—more than twice the value of a barrel of crude. As a result, diesel’s so-called crack spread (i.e., the difference between crude and refined product prices) has risen to record levels; it currently sits around $100 per barrel, roughly five times its normal level of around $20 per barrel. It is in this context that the Trump administration is now frantically searching for any measure that will alleviate diesel prices, even temporarily, ahead of the midterms.

Russian respite.

We’ll start with the most recent deal between Washington and Moscow. Following a phone call with the Kremlin in early October, Trump announced that Russian President Vladimir Putin pledged additional supplies (e.g., 500,000 tons of diesel in November) to help alleviate the ongoing diesel crisis. To ease the flow of these Russian barrels into the strained global diesel market, the U.S. Treasury waived U.S. sanctions on Russian diesel through April 7, 2027.

The challenge with this intervention is that the volumes at play (500,000 tons in November) sound large but only represent roughly 125,000 bpd of export flow. And it’s not entirely clear whether the pledged volumes are target levels or truly additional barrels; current Russian exports of diesel and gasoil stand between 100,000 and 150,000 bpd, so Putin’s 125,000 bpd pledge is either a commitment to the beleaguered status quo or, in the best-case scenario, a doubling of those shipments from one-tenth of the prewar norm to more like one-fifth. Even without any changes to the status of Russia’s refinery fleet, we would expect Russian exports to rise modestly over the coming months as domestic demand declines following the harvest season.

Moreover, Moscow isn’t voluntarily restricting diesel exports. For Russia to materially lift its diesel exports, Ukraine would need to stop bombing Russian refineries. To that end, Trump tried to announce an “energy ceasefire” between Moscow and Kyiv on October 11. Ukrainian President Volodymyr Zelensky initially agreed to honor a ceasefire if Moscow halted strikes on Ukrainian energy infrastructure ahead of winter. But Moscow hit numerous Ukrainian energy assets like power generation stations later that day, and Zelensky noted that these attacks were evidence that Putin was “unwilling to accept an energy ceasefire.” A White House official later told Axios that it wasn’t really so much an “energy truce,” per se, as a “refinery for refinery proposal.”

All else equal, Trump’s sanctions relief for Russian diesel actually further bolsters Kyiv’s rationale for striking Russian refineries: A big driver of the strategy was Ukraine’s desire to deprive Moscow of windfall energy earnings on the back of the Iran war. Indeed, the temporary lull in Ukrainian strikes against Russian refineries ended Thursday with an attack on a refinery in the Ryazan region southeast of Moscow. Zelensky told the Financial Times that he has run out of patience with Trump’s diplomatic theater and that “we’re done.” Ukrainian forces have struck numerous other refineries and fuel facilities over the past week.

Coercing Europe.

Trump has also openly toyed with the idea of banning U.S. diesel exports to preserve domestic supplies. Republican lawmakers from farm states have called on the administration to restrict U.S. diesel exports, with Iowa Sen. Chuck Grassley declaring that “High diesel prices ARE KILLING FARMERS INCOME.” Trump in September confirmed that his team was “seriously considering” such a ban but later abruptly abandoned and rebranded the idea as merely a threat to force European countries to release their emergency diesel stockpiles. To his credit, Energy Secretary Chris Wright came out strongly against the idea, arguing, “The blunt tool of banning diesel exports definitely doesn’t work.” Wright is right, and thankfully the administration has generally dropped the idea.

Banning U.S. diesel exports was never a real domestic policy solution. The U.S. Gulf Coast refining hub is a structural net exporter of diesel because the region produces more than it can consume. If those exports had suddenly been blocked by presidential trade restrictions, inventories would have begun to rapidly build and local prices would have begun to fall. The challenge is that, while consumer prices would have fallen in the short term (i.e., ahead of the polls), lower prices would, after a few weeks, have destroyed the incentive for refineries to run so aggressively. U.S. refinery utilization currently sits around 94 percent, well above the norm, precisely because prices are so high. So, even though a diesel export ban would have been popular with Trump’s political base, this policy intervention would have ultimately had a negative impact on domestic supplies of diesel, as well as gasoline, jet fuel, etc.

Such a ban would have also dealt a crushing blow to the already fragile global diesel market. While the Middle Eastern and Russian diesel exports have collapsed this year, U.S. exports have risen notably to fill the gap. Initially, Trump even boasted about this export boom as a sign of the U.S.’s energy dominance. Indeed, the loss of U.S. diesel supplies would acutely spike global prices. This move would further harm allied economies and feed inflationary pressures that would, in turn, be imported back into the U.S. via the East and West coasts, which remain structural importers of fuel.

So the White House pivoted to using the threat of a ban to coerce European countries into agreeing in early October to release emergency diesel stockpiles. While the specific pledges are still unclear, an earlier French proposal included 50 million barrels of both crude and diesel, and later G7 language indicated that pledged volumes would be released over four months. This is not a solution, but it is a meaningful salve through what is widely expected to be an excruciatingly tight winter heating oil season. A 50-million-barrel emergency diesel release over four months would offer real, albeit temporary, relief—roughly one-third of our recent loss of supply between the Middle East and Russia. The official G7 communiqué included a pledge for a “frontloaded substantial diesel release within the first 20 days,” though, crucially, it has been 18 days since the announcement and there are no tangible results.

Neither side is exactly innocent here: It is obviously wrong to threaten allies with a ban on critical exports during a fuel crisis, but European countries would have a far stronger case if they hadn’t slow-played their contributions to the record 400-million-barrel International Energy Agency (IEA) release announced in March. The IEA noted this month that roughly 100 million barrels of the 400 million barrels pledged have yet to be released. European industry insiders have argued that European emergency stocks are held back in case of actual supply shortages and not just to drive down prices. But the entire purpose of the March release was to offset the acute loss of Middle Eastern supply to blunt economically debilitating price spikes. And both the U.S. and Japan have largely fulfilled their crude-heavy commitments.

Red dyeing and other efforts.

In early October, Trump issued an executive order that “temporarily opens highway use of tax-free dyed diesel, deferring the federal diesel tax on that fuel through the end of the year” to “immediately cut diesel costs for the truckers and farmers who keep America moving.” Red-dyed diesel is chemically identical to normal diesel except for the addition of red dye that both indicates its tax-free status for off-road uses, including in farm equipment, as well as allows tax authorities to enforce that off-road use—a driver risks steep fines if their on-road truck is inspected and found to have red dye inside the engine.

The decision to suspend enforcement of these restrictions shows that efforts to ease fuel costs have clearly extended beyond geopolitics and into areas of tax policy that the White House can adjust without new laws from Congress. However, the operative word here is deferred rather than eliminated, leaving future tax liabilities and enforcement uncertain. And more importantly, this policy intervention doesn’t do anything to actually change the available supply of diesel across the U.S. economy.

Instead, the policy intervention is, most realistically, a distraction that farm-state candidates can point to in their stump speeches. At best, it’s a back door to fuel tax relief without a congressional vote; at worst, it could add further uncertainty for those already attempting to navigate the ongoing fuel crisis. In my conversations, congressional staffers from farm states even cited farmers’ concerns that this could boost nonfarm demand, making it harder for farmers to source fuel.

In conclusion.

The White House is trying everything within its power to alleviate record diesel prices ahead of the midterm elections but has, overall, failed to move the needle. The White House remains dependent on Europeans, who have chronically slow-played their reserve-release commitments, to act quickly; Ukrainian forces to pull back from their most successful strategy against Moscow to date; and, more generally, U.S. midterm voters to accept these policy intervention efforts. In the long run, U.S. consumers will only experience lasting relief at the pumps when the wars in the Middle East and Ukraine end.

Disclaimer: These materials incorporate third-party data, are provided for informational purposes only, and do not constitute advice or opinion of any kind. Commodity Context does not warrant or guarantee the accuracy or completeness of these materials.

Every week, I summarize and analyze developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely—including our ongoing tracking of shipping flows throughout the Middle East.

Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

On the latest episode of the Oil Ground Up podcast (YouTube), I was joined by the one and only Javier Blas, long-time oil watcher, Bloomberg Opinion columnist covering energy and commodities, and co-author of The World for Sale: Money, Power, and the Traders Who Barter the Earth’s Resources. Our sweeping conversation looked at the evolution of commodity trader risk tolerance through the fog of war; what’s happening in the Strait of Hormuz and the broader Gulf; how record tanker rates are balkanizing a previously global oil market; the unique and impossible to understate role of China through the crisis; and how OPEC may be reconsidering its future in light of current events.

For more public oil market context, check out my long conversation with Drop Site News’ Ryan Grim (YouTube) and with Mario Nawfal (YouTube) about Trump’s oil market heading into the midterm elections in a few weeks. I also spoke with Bloomberg News (print) about the perfect storm of factors—from exploding shipping rates to weak USGC fuel oil markets—currently standing between Canadian oil producers and their ability to take advantage of high global crude prices, which I expand upon in the report below. As I said to Bloomberg, “Generally, it’s all bad news for Canadian oil.”

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

Summary

Flat Prices rose roughly $5/bbl for Brent to finish around $110, briefly popping above that level for the first time since May in a furious Friday rally amid rumours of renewed damage to Saudi infrastructure and rapidly proliferating concerns that both the US-Iran and Saudi-Houthi conflicts could escalate imminently.

Timespreads performance was split through most of the week between easing backwardation across Brent and Dubai juxtaposed against strengthening backwardation in WTI prompt spreads; however, everything rallied hard together on Friday. While normally a clear sign of firm physical market strength, this latest re-strengthening of futures backwardation should be tempered by the sharp and contemporaneous $10/bbl decline in the price of Dated Brent.

Inventories data leaned bullish on the back of a large, hurricane-driven draw in US inventories; both ARA European and Singaporean stocks built from still-depressed levels.

Refined Products markets are still dominated by hyper-tight middle distillate markets that are keeping crack spreads around $100/bbl despite the White House pulling every imaginable lever ahead of the midterms; gasoline cracks have fallen steadily through October, though remain at more than double seasonal levels.

Market Positioning data confirmed that speculators were modest net buyers of crude futures and options contracts, with the net spec position sitting at the high end of recent experience as a share of total open interest across the six largest crude contracts; Friday’s sharp rally likely indicates that further hot money poured in (or shorts covered) ahead of the weekend.

As Well As Strongest pace of Hormuz shipping attacks thus far depresses oil flows and tempts US retaliation; the perfect storm weakening Canadian crude prices; and Russia’s diesel commitment complications (spoiler: Ukraine hit two more Russian refineries over the past 24 hours)

What Happened This Week

Read more

If you’re already subscribed and/or like the free summary bullets, hitting the LIKE button is one of the best ways to support my research.

• Quota-participating OPEC+ crude production rose +966 kbpd in September according to official secondary source aggregate estimates published in OPEC’s Monthly Oil Market Report (MOMR), with the bulk of those gains coming from Saudi Arabia, which loaded aggressively in the Gulf for the first time since the beginning of the war, and Iraq, which recovered to 94% of prewar levels thanks to aggressive cargo discounting.

• Iranian crude production continues to collapse, with estimated output falling 99 kbpd m/m to below 2 MMbpd in September for the first time since 2020 as the US blockade has reduced upstream output to the level of domestic use absent any material export avenues.

• Total Middle Eastern oil production shut-ins today stand between 4 and 6 MMbpd based on the latest observed pace of exports following the recent apparent pullback in Hormuz transits, while total cumulative supply losses from the region through the war have risen to more than 2.3 billion barrels as of early October.

Middle Eastern OPEC exports rose substantially through September as oil flows through the Strait of Hormuz hit a wartime high, reducing export-implied production shut-ins to their lowest level of the war, at roughly 2 MMbpd excluding Iran and just more than 4 MMbpd including Iran. Given the recent spike in Iranian shipping attacks and subsequent apparent pullback in Hormuz flows, the latest estimate of shut-ins has risen to between 4 and 6 MMbpd. The total cumulative loss of Middle Eastern oil supply, relative to the prewar average level, has soared to 2.3 billion barrels as of early October.

[Full PDF Deck and additional analysis below paywall]

Read more

Every week, I summarize and analyze developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely—including our ongoing tracking of shipping flows throughout the Middle East.

Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

Thanks to all the subscribers who came out to join us for drinks and oil market conversation in Washington, DC this week. And a huge thank you to the Center for New American Security for hosting us for a conversation about the Beijing Swing as well as everyone else who made time to meet and discuss the historic recent developments in fuel markets.

For more free oil market context, check out my latest media commentary: CBC (video) and Wall Street Journal (print).

In case you missed our latest episode of Oil Ground Up last week I wanted to highlight that the conversation has since sparked a flurry of headlines, mostly focused on our guest, Michelle Brouhard, Head of Policy and Geopolitical Risk at Kpler, who shared her suspicion that Iran was receiving some kind of consideration (i.e., payment) in exchange for allowing some portion of those oil flows that rose dramatically through August and September.

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

Summary

Flat Prices rose roughly $2/bbl for Brent to end above $104/bbl, though the small gain belies the nearly $10/bbl trading range during the week as the barrel was bounced between diplomatic hope, renewed talk of additional SPR action, rumours of pre-midterm election strikes, and then Trump’s explicit pledge (whatever that’s good for) to not attack before the midterms; all the while, the previously-improving pace of oil flow through the Strait of Hormuz slowed as shipping attacks escalated.

Timespreads remained firm but have begun to even more notably diverge between Brent and Dubai, both of which are still seeing very strong prompt backwardation, and WTI, which is now seeing prompt backwardation at the lowest level in two months; as with much of the dislocation in the current market, WTI’s relative weakness is largely due to skyrocketing tanker rates as well as some likely idiosyncratic US SPR-related weakening.

Inventories data was mixed as crude stocks began to decline again in the US alongside a very large pullback in ARA European crude stock that erased most of the recent building trend and brought levels back to the bottom of their trailing seasonal range.

Refined Products remain in largely uncharted territory, continuing to set fresh high seasonal levels; political pressure to find a solution to tight fuel supplies, especially for acutely-short diesel, has the White House flailing across all manner of desperate measures from expanding the allowable use of red dye diesel (normally only allowed to be used in off-road equipment) to, most recently, dropping sanctions on Russian diesel.

Market Positioning data revealed that speculators were modest net sellers of crude over the past week, but that small net movement was actually driven by more sizable declines of both long and short positions as hedge funds and other money management companies lost faith with directional oil market calls altogether.

As Well As oil flows slow through the Strait of Hormuz; it’s been all tit, no tat as Iran ramps shipping attacks; why and how did Iranian shipping attacks rise in the first place?; Trump announces new Russian diesel export pledge; and Chinese refined product exports are not out of the game.

What Happened This Week

Read more

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

• North American petroleum liquids production rose +526 kbpd to 31,820 kbpd in July, +843 kbpd compared to the same month last year. While US crude production hit a fresh, all-time high in July, the overall pace of y/y continental output growth continues to decelerate despite the high price environment.

• Refining runs across the continent are +207 kbpd y/y as refiner incentives (i.e., crack spreads) keep every facility pumping at full tilt for as long as owners can keep the facilities online.

• North American petroleum product consumption rose (+241 kbpd m/m) seasonally in July; but, overall demand was down (-558 kbpd) as consumers retrenched amidst the exceptionally-high product pricing wrought by the Iran War and Russian refining crisis.

• Western Canadian Select (WCS) crude differentials in Hardisty, Alberta, widened to more than $25/bbl under WTI and to more than $16/bbl in Houston, the widest levels since November 2023 and January 2023, respectively. This widening is being driven by both quality-related market weakness, connected to an increasingly oversupplied USGC fuel oil market, as well as the exploding cost of shipping given that marginal WCS barrels are exported to Asia.

[Full PDF Deck and Country-Level Analysis Below Paywall]

Read more

Every week, I summarize and analyze developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely—including our ongoing tracking of shipping flows throughout the Middle East.

Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

I’ll be in Washington, DC next week discussing our Beijing Swing research and sharing Hormuz Crisis thoughts with clients, other analysts, and policymakers. Drop me a line if you’re interested in grabbing a coffee or having me speak to your team. We’re also looking to put together a subscriber event while I’m in town; if you’re interested, please add your name to the form below the subscriber paywall.

In the latest episode of the Oil Ground Up podcast, I was joined by Michelle Brouhard, head of policy and geopolitical risk at Kpler, for a conversation focused on the world’s many spiralling geopolitical quagmires. We consider the options that global governments have to deal with the acute diesel supply crisis as well as the recent controversy surrounding tanker tracking data, which shows Hormuz transits rising notably over the past month, and whether Iran has “lost control” of the Strait.

For more free oil market context, check out my conversations with David Lin (YouTube), the Facts vs Feelings podcast (YouTube), the WTFinance podcast (YouTube), as well as BNN Bloomberg (YouTube) and The New Republic about the diesel crisis (Print)

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

Summary

Flat Prices slipped ~$1.50/bbl but prompt Brent held over $100/bbl; while the recent recovery in Middle Eastern oil flows has calmed the market’s most frayed nerves, prices remain high and structure remains tight, indicating that prompt demand has rallied to meet any increased flows out of Hormuz.

Timespreads took a step back after their explosive performance last week, hitting a monthly high on Monday but otherwise steadily easing back into Brent’s November contract expiration on Wednesday; while front-curve timespreads have shed roughly half their backwardation relative to Monday highs, all curves continue to sport backwardation that would be, in any other moment, considered a sign of crisis-level prompt supply deficits.

Inventories saw product-heavy declines in the US and Singapore, while ARA European stocks rose from still-depressed overall levels.

Refined Products experienced extreme volatility as policy-driven headlines—from trade restrictions to SPR releases—buffeted precarious fuel markets; US diesel prices pulled to below a $90/bbl crack spread vs Brent, but only after hitting all-time intraday highs (~$125 crack, ~$228/bbl flat price) amid a contract expiry day squeeze.

Market Positioning data indicated that speculators were net sellers of crude futures and options contracts over the past week through Tuesday driven by a pullback in gross length; this is a relatively bullish print given a net pullback in speculative positioning while prices actually climbed ~$4-5/bbl—the far stronger pull of physical over paper market influences.

As Well As European nations announce diesel-heavy SPR release; East-West Pipeline flows are accelerating much faster than expected; Middle East flows data sparks debate and weighs on prices; and Our Middle East Flow Context (hint: a very probable pullback)

What Happened Last Week

Read more

If you’re already subscribed and/or like the free summary bullets, hitting the LIKE button is one of the best ways to support my research.

• A global shortfall of diesel supply is being driven by both the ongoing Hormuz crisis and escalating attacks by Ukraine against Russia’s refinery fleet as seaborne exports from the world’s major exporters fall 1-1.5 MMbpd.

• Diesel prices are skyrocketing—hitting all-time highs this week—in search of demand-destructive levels and diesel term structure is indicating a chronic rather than short-lived crisis.

• Absent any durable supply response, diesel demand-destructive prices will almost certainly force a major downward shift in global economic activity given that the cost of the fuel is sprinkled across almost every supply chain.

• A boost in Chinese diesel exports could ease the supply crisis but Beijing isn’t in the habit of letting its independent refineries chase global market profits and, more importantly, appears focused on maintaining the domestic economy and preserving domestic stocks.

• Similarly, Europe possesses sizable diesel reserves but does not appear keen to meaningfully tap those fuel reserves at scale yet, even despite threats from Washington—perhaps on broader expectations that there is further, truly catastrophic tightness barreling towards us.

• Now, the US is now considering a diesel export ban—a cursed policy option that will quickly backfire—as world-leading export volumes come face-to-face with high and politically untenable domestic US pump prices heading into midterm elections next month.

Diesel fuels the global economy, propelling the road freight transportation and industrial vehicles that make the world go round. The trouble is that we, increasingly, do not have enough of it. The reason for the shortfall of diesel supply is, by this point, well known. The diesel crisis began with the Iran War and then grew ever more acute as Ukraine began escalating attacks against Russia’s refinery fleet—bringing the pain of the war to the Russian homeland and largely knocking the world’s second-largest diesel exporter out of the market.

Absent a durable supply response, the market is in desperate search of demand destructive pricing. This month, scarce supply pushed diesel futures to all-time highs of nearly $230/bbl in New York Harbor. The average US diesel pump prices soared above $6.50/gal for the first time in history. But diesel demand destruction is difficult and slow: unlike other consumer fuels, like gasoline, diesel is an embedded structural cost throughout most of the global economy, with currently high prices gradually sapping margins and increasing consumer costs through channels that are impossible to avoid.

But there is no “dark transit” loophole for a global shortage of refining capacity. Unlike the broader oil market, diesel faces a far more straightforward dilemma stemming from the Iran War. The broader oil market can benefit from rerouting pipelines, crude-heavy SPR releases from the US and Japan, and the rising flow of largely crude oil dark-transited through the Strait of Hormuz. But diesel can only be produced by transforming a barrel of crude oil—and only part of the crude barrel at that!—in an oil refinery, and the world is increasingly short of refining capacity accessible to the market.

While diesel scarcity has been a long-running story since, at least, 2022 (see: Collapsed Bridge to the Refining Crisis and Refiners’ Unbalanced Barrel), the diesel market now additionally faces the proliferation of war, maritime bottlenecking, and asymmetric attacks on fixed refinery infrastructure on top of the underlying issue of global refining capacity. Let’s dive into what’s driving the current diesel market crisis and the limited options for durable near-term relief.

Export Collapse

Read more

Every week, I summarize and analyze developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely—including our ongoing tracking of shipping flows throughout the Middle East.

Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

Summary

Flat Prices again ended the week more or less flat, up less than $1/bbl; contracts started the week under further downside pressure stemming from further US-Iran diplomatic optimism, before they rallied through Thursday on the same diplomatic roadblocks as always together with renewed concerns regarding physical crude scarcity.

Timespreads ratcheted higher across crude grades but the gain was sharpest in Brent, which saw prompt futures spreads rise by ~50% to around $7/bbl while DFLs doubled from Tuesday’s lows to more than $10/bbl; crude markets continue to signal mounting scarcity despite the rising flow of oil from Hormuz, reflecting both the loss of Red Sea supplies and rising import appetite despite higher prices heading into winter.

Inventories data was mixed between flat headline stocks (crude up, products down), a moderate crude-driven build in still-depressed ARA European stocks, and a sharp decline in Singaporean inventories that entirely unwound the prior week’s steep build in light distillate stocks.

Refined Products markets loosened notably this week from last week’s extreme heights; US diesel crack spreads fell back by ~$20/bbl and gasoline followed suit, shedding more than $10/bbl from mid-week crack-highs; some of the pullback was driven by headlines this week that indicated that the White House was warming to the idea of a diesel export ban, but European gasoil crack spreads also pulled back by ~$15/bbl indicating a broader easing of middle distillate scarcity concerns on the week.

Market Positioning data confirmed that speculators were moderately large net sellers of crude futures and options contracts over the past week-through-Tuesday,

As Well As a US-Iran diplomatic optimism merry-go-round at the UN General Assembly, the White House awkwardly lurches toward a diesel export ban, and cracks emerge as the Beijing Swing ages.

What Happened This Week

Read more

If you’re already subscribed and/or like the free summary bullets, hitting the LIKE button is one of the best ways to support my research.

Overview

• Global liquids balances loosened modestly through July on the back of rising Middle Eastern production following the US-Iran MOU and the short-lived surge of flows of our Hormuz, though an upturn in summer demand—even if blunted by high prices—absorbed most of those additional barrels and kept the market in supply deficit for a 5th consecutive month. Stock draws resumed in line with those ongoing deficits after June’s oil on water surge.

Read more

Every week, I summarize and analyze developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely—including our ongoing tracking of shipping flows throughout the Middle East.

Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

For more public oil market context, check out my discussion with Contrarian Codex (audio), Mario Nawfal (video), and MacroHive (video), as well as my contributions to The New York Times (print) and Axios (print).

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

Summary

Flat Prices fell just more than $1/bbl for Brent crude to end the week around $103/bbl, still higher than before the East-West pipeline was taken offline by Iranian proxy attacks; Dated Brent hit a high of nearly $132/bbl before pulling back later in the week.

Timespreads were flat to weaker, though only from their immediate post-Saudi pipeline attack rally and still hold steeper prompt backwardation than before the attacks occurred; indeed, the trend toward steeper prompt backwardation has been building for the past 3 weeks and indicating a growing shortfall of prompt barrels relative to demand before this latest loss of physical supplies.

Inventories data leaned unanimously bearish thanks to moderate-to-large builds across all major tracked consuming regions; US stock builds are heavily product-tilted while a second considerable light distillate-driven build in Singapore brought overall stock levels back within the seasonal range after months of depressed holdings.

Refined Products markets continue to be dominated by crisis-scarce diesel supplies, which pushed the price of the industrial workhorse fuel to more than $220/bbl in New York Harbor (more than double the price of Brent crude); despite these sky-high diesel prices, prompt backwardation, while obviously steep, is still below both March-April and peak-2022 levels, indicating that markets are beginning to position for a longer-lived stretch of distillate shortages.

Market Positioning data confirmed that speculators were only modest net buyers of crude this week despite the roughly $10/bbl gain between the two sample periods, indicating that physical panic-buying rather than a surge in speculative paper flows drove crude prices higher following the attacks on the East-West pipeline.

As Well As Saudi East-West pipeline out of service, what this outage and the recently communicated repair timeline mean for oil market flows, and why wasn’t Saudi Arabia already more aggressively trying to get barrels out of Hormuz before this attack that forced their hand? Meanwhile, oil flows through the Strait of Hormuz continue to grind higher, and wealthy countries mull additional strategic petroleum reserve releases.

What Happened This Week

Read more

If you’re already subscribed and/or like the free summary bullets, hitting the LIKE button is one of the best ways to support my research.

• Across virtually all products, the collapse in apparent petroleum product demand—which is to say the available supply / disappearance of product within the Chinese economy—ran far deeper than any commensurate activity decline in end-use sectors.

• Export restrictions helped shore up domestic jet fuel and gasoline supplies but China actually saw larger cuts to naphtha and LPG imports; while helping mitigate some product-level imbalances, trade in refined products was actually a net exacerbating factor to the apparent demand shortfall.

• The most explainable apparent demand shortfall is jet fuel: a prioritization of refinery yields and the largest pullback in net exports kept domestic markets comparatively well supplied plus a flight-cancellation-driven dip in air travel activity, which collectively explains most—but not all—of the contraction.

• Diesel is the largest product category and the hardest to explain: freight activity accounts for nearly 70% of end use yet freight activity continued at a healthy clip despite the near 20% contraction in apparent diesel demand.

• World-leading electrification and the penetration of other non-oil-based fuels (e.g., natural gas) help explain China’s resilience to the sudden halt to nearly a fifth of gasoline supply but gradually evolving vehicle fleet composition fails to effectively explain the sudden sharp collapse in apparent fuel demand.

• Unobserved inventory management (strategic or otherwise) is a useful explanation in the case of several products—especially diesel and gasoline—where it is difficult to otherwise square the loss of refined product with lack of economic impacts.

• It also matters because if inventory management was a key pillar of the Beijing Swing then the Swing is inherently temporary; indeed, we are already beginning to see China crude and other petroleum imports partially recover.

As discussed in Part 1: Crude Oil, China’s colossal crude oil import cut (i.e., “The Beijing Swing”) was the single-largest, and unexpected, counterbalance to the unprecedented shuttering of the Strait of Hormuz. China cut crude seaborne oil imports by a staggering 5.4 MMbpd, a historic exercise of influence over the oil market nearly equivalent to the collective volume of cuts OPEC+ maintained between 2023-24—but by a single country. This historic pullback in apparent crude demand was accomplished through (1) shifts in Chinese strategic crude stockpiling policy and (2) refining run cuts.

Indeed, the lion’s share of the Beijing Swing came from the sharpest pullback in refining runs in China’s modern history, exceeding even the prior record set through Beijing’s COVID-zero lockdowns in 2022. Refining runs fell by at least 2.7 MMbpd from the immediate prewar average pace of 15.2 MMbpd in January-February to roughly 12.5 MMbpd in June, according to official data. Refining run cuts were driven, in part, by the collapse of refining margins to all-time lows. In the face of skyrocketing global open market prices, Beijing’s system of regulated retail prices kept prices at China’s pumps artificially low and relatively stable; but, Chinese refineries were pushed into a situation of losing money on each and every barrel processed.

These significant refining run cuts spurred downstream mystery: how is China managing with such a sharply lower volume of refined fuels coursing through its economy? There are numerous theories about how China pulled off the Beijing Swing without material changes in end-use sector activity. Some of the shortfall was covered by refined product export cuts, which preserved products for the domestic market and stopped the pricing gap from spurring an export boom. Other theories pointed toward coal-to-chemicals feedstock substitution or China’s electrified transportation boom as direct offsets for missing imports, and even broader economic weakness driven by a flagging property sector.

While many coping mechanisms can be identified on a product-by-product basis, it is difficult to ignore overarching signs of “smoothing”. Even combined, these coping mechanisms—from export bans to electrification to precursor production cuts—fail to fully explain the magnitude or pace of the largest-ever rout in Chinese refining runs and domestic fuel supply. Thus, unobserved inventory management (strategic or otherwise) is a useful explanation in the case of several products, especially diesel and gasoline, where it is difficult to otherwise square the loss of refined product with lack of mobility or end-use activity impacts.

The question of whether the Beijing Swing relied on unobserved inventory management of both crude and refined product matters a great deal to its durability. If China did not rely on inventory management, then Chinese demand is remarkably elastic, this can be kept up indefinitely, and the days of durable oil price spike risks are behind us. But if the Beijing Swing was indeed facilitated by some degree of inventory management, then the Beijing Swing is inherently time bound, like any other release of strategic reserves, and has only postponed the inevitable.

This piece, Part 2, will focus on the labyrinth of refined products, natural gas liquids, and petrochemicals to better understand what we know about how China managed the Beijing Swing.

Note: In the process of writing this report, our China oil modelling has been extensively revised to reflect a broader range of more accurate information. We plan to begin publishing these China data soon in a new monthly China Data Deck—stay tuned!

Domestic Supply Hole

Read more

Every week, I summarize and analyze developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely—including our ongoing tracking of shipping flows throughout the Middle East.

Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

On the latest episode of the Oil Ground Up Podcast, I spoke with Rob Wilson, President of East Daley Analytics, for a deep dive into the rapidly changing North American oil infrastructure landscape. We discussed the latest resurrection of Keystone XL; whether Canada can realistically produce enough incremental oil to fill all the proposed capacity; the increasing competition between private-sector and strategic pipelines; and the return of Venezuelan heavy crude and if it poses a meaningful threat to Canadian barrels in U.S. refineries.

For more public oil market context, check out my contributions to TVO’s The Rundown (video) and Financial Times (print).

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

Summary

Flat Prices rose nearly $9/bbl for Brent prompt futures to end around $105/bbl on the back of Houthi Red Sea advances and confirmed strikes on Saudi Arabia’s East West pipeline; Dated Brent soared $13/bbl to close above $120/bbl on Thursday for the first time since April.

Timespreads strengthened across the board, adding fundamental confirmation to the ongoing rally in flat prices; most of the term structure gains occurred on Thursday after news of the East-West Pipeline attacks and were, likely, driven by a precautionary demand bid for physical barrels.

Inventories data leaned directionally bearish with larger, product-driven builds in the US and Singapore and only a modest draw in ARA Europe; inventories of all major road fuels across all major importing regions remain extremely low, justifying historically-high crack spreads.

Refined Products continue to suffer from even tighter supply deficits than crude and diesel remains clearly the most desperately short-supplied; diesel futures have risen to the highest sustained level on record, with roughly half that price driven by crack spreads alone as the industrial workhorse fuel frantically—but, of yet, unfruitfully—searches for demand destructive pricing levels.

Market Positioning data confirmed that speculators were small net-buyers of crude futures and options contracts over the past week-through-Tuesday, though hot money flows differed materially between benchmarks: the net spec position in Brent rose slightly, WTI rose notably, and the spec position in Dubai contracts fell to their lowest level on record.

As Well As Houthis dramatically up the stakes for Saudi oil supplies and make material territorial gains to further threaten the Bab el-Mandeb Strait, confirmed strikes take Saudi Arabia’s East West-Pipeline offline, the latest tracking on Hormuz oil flows and renewed hopes for an Iran-Oman safe[r] shipping deal, and Dated Brent price hits highest level since April.

What Happened This Week

Read more

If you’re already subscribed and/or like the free summary bullets, hitting the LIKE button is one of the best ways to support my research.

• Quota-participating OPEC+ crude output rose +627 kbpd in August according to official secondary source aggregate estimates published in OPEC’s Monthly Oil Market Report (MOMR), with the bulk of those gains coming from Iraq which continues to drive output higher via aggressive cargo discounting and heavy Hormuz shuttle trade activity.

• The biggest news in this MOMR (included in a footnote rather than the main tables, far more discussion below) was the revelation that Saudi crude production cratered 1,897 kbpd on the month to average 6,238 kbpd in August on the back of the Houthi maritime ban and escalating attacks against Saudi Red Sea coastal infrastructure. This is both lower than the April 2026 nadir (6,316 kbpd) and is, in fact, the lowest monthly average crude production Saudi Arabia has maintained since Desert Storm in 1990.

• Iranian crude production continues to collapse, with estimated output falling ~400 kbpd in August to just more than 2 MMbpd, the lowest level since 2020, as the US blockade continues to bite.

[Full PDF Deck and additional analysis below paywall]

Read more

Every week, I summarize and analyze developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely—including our ongoing tracking of shipping flows throughout the Middle East.

Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

For more context, check out my latest talking points in CBC News Network (video), Globe and Mail (print), CBC (print) and Breaking Points (video).

And for even more energy sector newsflow,

Here is the briefing top leaders in energy rely on.

Semafor Energy reaches over 50,000 readers — including energy executives, investors, and regulators — with reporting on the business and economics driving today’s energy transition. Subscribe for free.

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

Summary

Flat Prices rose ~$7/bbl for Brent to end above $96/bbl amidst fresh military escalation in the Gulf, a spiralling refined products crisis, and mounting signs of stress in prompt crude availability; this price move marks a full unwinding of the prior week’s pullback, the highest weekly close since late-July, and leaves prices within less than a dollar of the highest weekly close since May.

Timespreads ratcheted into steeper backwardation, once again, across all major crude grades this week as WTI, Brent, and Dubai crudes all sport prompt backwardation of ~$3–5/bbl (and in that order); this tells us that, while not as tight as diesel (prompt spread > $6/bbl), crude markets remain physically tight in their own right.

Inventories data showed draws across all major tracked commercial hubs, with stocks of key road fuels continuing to show acute strain globally; US crude stocks fell for the first time in a month, though desperately-low diesel stocks inched higher for the first time since July.

Refined Products markets saw diesel reach all-time high crack spreads following confirmation that Moscow would extend its diesel ban through the end of the month while prompt gasoline crack spreads rolled off with the end of driving season but remained ~4x higher than the seasonal average, still pushing $40/bbl vs Brent.

Market Positioning data confirmed that speculators were once again notable net buyers of crude length and that while some upside room remained the balance of position-normalization risks is increasingly to the downside; in the world of refined products, speculative length in gasoline is enormously high (top 4% over past 20 years) and risks a sharp reversal, while still only moderate net length in middle distillate contracts reaffirms diesel’s fundamentally-driven rally.

As Well As current Hormuz oil flow is likely around 8 MMbpd and my thoughts on Rosneft’s chief highlighting China’s newly dominant role in Hormuz oil market management as overtaking OPEC’s traditional perch.

What Happened This Week

Read more

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

• North American petroleum liquids production rose +157 kbpd m/m to 31,242 kbpd in June, up +936 kbpd y/y, as a rebound in Canadian production from seasonal maintenance helped offset flagging upstream growth in the US.

• Continental petroleum product consumption rose seasonally by +607 kbpd to 25,175 kbpd in June, but that was actually down 483 kbpd on the year thanks to across-the-board pullbacks in consumer gasoline demand amidst the high prices; overall consumer fuels faced a more notable slowdown while the demand for industrial fuels proved more resilient.

[Full PDF Deck and Country-Level Analysis Below Paywall]

Read more

Every week, I summarize and analyze developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely—including our ongoing tracking of shipping flows throughout the Middle East.

Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

🎙️ Our summer interview hiatus is finally over and we’re back with another episode of the Oil Ground Up podcast to speak with David Weck, chief economist of tanker tracker Vortexa, about plunging volumes of oil on water, sorting fact from fiction on Hormuz and Red Sea shipping activity, and just how scarce the global diesel trade has become.

For more public oil market context, check out my comments to Wall Street Journal (print) concerning the pace of confirmable transits through the Strait and our Q&A in Responsible Statecraft (print) and how oil markets have evolved through the Hormuz crisis.

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

Summary

Flat Prices fell ~$5/bbl for Brent to finish just below the $90/bbl mark as markets unwound their prior concern that the promised US sanctions package could re-escalate the conflict as measures proved only incremental and the physical flow of oil through Hormuz continued to rise.

Timespreads continue to indicate modest tightness in prompt crude availability for both WTI and Brent compared to a more notably strengthening market for Middle Eastern-delivered grades; Dubai’s relative strength likely reflects both strong Asian refiner demand and ongoing losses of previously-expected Saudi barrels through the Bab el-Mandeb.

Inventories were mixed between across-the-board headline builds in all major geographies and the fact that builds, especially stateside, came in the form of already-well-supplied products; meanwhile, stocks of far more precarious gasoline and diesel continued to draw down, further tightening those already historically tight road fuel markets.

Refined Products remain far and away the tightest corner of the oil complex, with both gasoline and diesel crack spreads at all-time seasonal highs; diesel margins pulled back very modestly while gasoline cracks leapt higher ahead of contract expiry as US inventories continued to plunge despite the US refining fleet running full-out.

Market Positioning data confirmed that speculators were net sellers of crude over the past week-through-Tuesday; the balance of positioning risks to crude are still to the downside given modestly overextended net length, though some upside room remains should the conflict escalate, whereas both gasoline and diesel are even more acutely overbought and at risk of sharp temporary pullbacks even if fundamentals remain scorchingly bullish.

As Well As more and more oil getting through the Strait of Hormuz (and less through the Red Sea), understanding the balance of incentives and risks influencing the evolution of transit volumes, and the US reportedly musing about quasi-imperial control over a massive chunk of Venezuela’s oil reserves.

What Happened This Week

Read more

Every week, I summarize and analyze developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely—including our ongoing tracking of shipping flows throughout the Middle East.

Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

For more Public Context, follow along my latest commentary: Drop Site News (video), Financial Post (video), Globe and Mail (print), CBC News (print), Politico (print).

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

Summary

Flat Prices rose more than $5/bbl for Brent crude to end the week in the mid-$90s, the highest level in a month, as the US-Iran MOU formally expired with no diplomatic replacement and both sides ratcheted up the rhetorical temperature.

Timespreads were notably split across the major crude benchmarks: Brent saw prompt timespreads and DFLs trade sideways-to-slightly lower, WTI spreads had been weakest but rallied hard ahead of contract expiry, and Dubai spreads are tightest as more Red Sea crude gets pushed north by the Houthi naval blockade into the Mediterranean.

Inventories data leaned bearish—at the headline level—thanks to large inflows of US commercial crude and NGL stocks, though diesel inventories continued to draw to the lowest level for this time of year since 1996; an ARA European build and Singaporean draw offset each other.

Refined Products continue to rally as gasoline looks to end driving season sporting all-time high seasonally-adjusted crack spreads and diesel refining margins have reached the highest level on record on a trailing 10-day average basis.

Market Positioning data revealed that speculators were only modest net buyers of crude, which lessens concerns expressed last week that there was too much froth coming alongside recent price gains.

As Well As digging into the diesel disaster and yet more colour on the ongoing debate about how much oil is really getting out of the Middle East right now.

What Happened This Week

Read more

If you’re already subscribed and/or like the free summary bullets, hitting the LIKE button is one of the best ways to support my research.

Overview

• The petroleum market remained in a Hormuz-driven supply deficit in June, though the combination of a short-lived recovery in Gulf production and China’s ongoing buyers’ strike slacked the market considerably from previously-sharp crisis levels. Onshore petroleum inventories continued to collapse despite the rerouting and alternative-exporter driven surge in oil on water readings.

• Brent crude prices remain in the mid-$90s and prompt backwardation continues to indicate steady supply deficits; contracts swooned through early August as the latest bout of US-Iran diplomatic optimism crested, before rallying again as conflict resharpened and the market began to adapt to the idea of an even longer and more protracted smouldering war in the Gulf.

Read more

Every week, I summarize and analyze developments in flat crude prices, calendar spreads, high-frequency inventories, refined products, and positioning data, as well as a taste of the themes I’ve been thinking about or following closely—including our ongoing tracking of shipping flows throughout the Middle East.

Paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.

Summary

Flat Prices rose $5/bbl this week for Brent crude to finish just below $90/bbl amidst fading hopes of a Hormuz management deal and talk of a far longer conflict, with prices further benefitting from a surge of inbound hot money flow.

Timespreads were split, with prompt timespreads for Brent largely unchanged around $2/bbl, Dubai’s doubling to roughly $3/bbl, and WTI’s gradually easing to around $1/bbl; despite the cross-grade differences, all major benchmarks continue to signal notable supply tightness via elevated—at least by historical comparison—prompt backwardation.

Inventories data was mixed but dominated by the massive 17+ million barrel build in US commercial crude stocks, which was driven by an acute and abrupt swing in the US crude trade balance; that trade balance is shifting the global supply deficit from drawing on US crude stocks toward the rest of the world, that, until recently, the US had stepped in to supply.

Refined Products rallied again after last week’s pullback as US gasoline cracks gained $5/bbl and US diesel margins gained ~$10/bbl to above $90/bbl; stocks of key road fuels are low and refinery runs were roughly 5 MMbpd lower year-over-year in July.

Market Positioning data confirmed that speculators were, once again, sizable buyers of crude futures and options contracts, pushing up the net speculative position as a share of total open interest to its highest level since early June; high speculative positioning, with crude prices still only in the high-$80s, is a downside price risk given a growing volume of capricious positions that are likely to be liquidated en masse when momentum inevitably swings lower again.

As Well As the war that never ends, US Energy Secretary’s 9 million barrel Hormuz exit claim sparks renewed focus on Hormuz outflows, parallel crisis in the Red Sea deepens and Saudi crude loadings struggle, and US asks Ukraine to ease up on CPC terminal attacks.

What Happened This Week

Read more