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.

Also a reminder that paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

In the latest episode of the Oil Ground Up podcast, I spoke with Amena Bakr, Head of Middle East Energy & OPEC+ Insights at Kpler and a very long-time OPEC watcher, about the latest tracking of the Hormuz crisis, the shockingly sanguine market reaction thus far, and how the political and industry leadership across the region is attempting to manage through this unprecedented shock to their operations.

I had an absolute blast joining Jacob Shapiro and Marko Papic on the Geopolitical Cousins podcast to talk about the Hormuz oil supply hole. Come for the barrel math, stay for the “which Twitter replies drive me to douse myself with gasoline and light a match” game.

This week, I also spoke with CNBC Squawk Box Asia (video), Bloomberg Intelligence (video), and Palisades Gold Radio (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 more than $15/bbl to break the three-week stretch of declining oil prices, notching the first weekly gain since mid-March, as the Iran War continued to smoulder without resolution and the Strait of Hormuz remained closed for its 8th full week.

Timespreads began to strengthen again after weakening through most of April, with both Brent and WTI prompt futures timespreads more backwardated than this time last month; overall, extremely strong backwardation—albeit off from its late-March/early-April highs—continues to broadcast an urgent signal to draw down stocks.

Inventories data registered draws across all three major tracked hubs; US road fuel stocks continue to draw aggressively while crude stocks remain stubbornly high—stocks of the latter are largely concentrated in the US Gulf Coast and believed to be staging for an anticipated pickup in exports to a Hormuz-starved market.

Refined Products are split: diesel margins continue to, largely, trade in line with flat crude prices on Iran War headlines and remain extremely elevated but still below recent highs, while gasoline crack spreads have lagged middle distillates but more steadily ground higher—to more than twice the seasonal norm—as we head into summer driving season.

Market Positioning data confirmed that speculators were modest net-buyers of crude contracts this week, though that net-gain was driven almost entirely by a pullback in gross speculative shorts; overall, spec positioning in crude remains high and thus positioning-related risk continues to point largely to the downside should that hot money get cold feet.

As Well As following the bouncing diplomatic ball, tracking the on-again-off-again prospect for renewed talks in Pakistan, Hormuz transits see sporadic movement but status remains largely unchanged, renewed concerns about mines and the months-long timeline required to clear them, Trump extends Jones Act waiver for another 90 days, US military presence in the Middle East continues to grow, and the latest round of new Iran-related sanctions.

What Happened This Week

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• Despite broad expectations that crude prices would rocket higher, the market reaction remains shockingly sanguine—with prompt Brent futures prices, somehow, spending most of April below $100/bbl—in the face of the currently-dire geopolitical context.

• The best explanation for the juxtaposition between headline shock and pricing is a combination of the (lack of) realized inventory declines as well as Presidential jawboning and the April 7th ceasefire.

• The impact to date of the Hormuz closure is most visible in term structure; while (still) elevated commercial inventories have provided a healthy buffer against upwards pressure on the curve, record backwardation in both physical and financial prices is placing a premium on prompt deliverable barrels as a signal to rapidly draw down those stocks.

• Frequent and strongly-worded verbal interventions by the White House have unnerved futures market participants; short-term downside is acute when another Trump post can, and will, sink the intraday price of crude by $10-15/bbl.

• The largest pullback in prices occurred after the ceasefire announcement on April 7th; there is no doubt that the ceasefire has reduced, for now, the threat of extreme escalation, including more catastrophic damage to regional production infrastructure, but it has also thus far failed to end the conflict or reopen the Strait.

• If the Strait of Hormuz remains closed for another two months, commercial inventories will be rapidly drawn down and historical relationships suggest we could see prompt Brent prices approach $200/bbl by the end of June.

The Strait of Hormuz has been closed for over seven weeks, shutting in a staggering 13 MMbpd of non-reroutable Gulf liquids production. The upstream shut-in has already accumulated more than a half billion barrels in unproduced output, en route to roughly a full billion barrels given lagged restart times even if the Strait was to fully reopen next week. Yet, the market reaction is shockingly sanguine in the currently dire geopolitical context. Despite many calls—including from yours truly—that crude prices would head sharply higher, prompt Brent futures have, somehow, remained below $100/bbl for most of April.

Perhaps, this juxtaposition—between headline shock and pricing—cuts to the heart of something that I’ve long argued: oil futures aren’t especially good at manifesting the market’s collective forward view. Under the glare of this lens, I, and many other oil analysts, may have violated my own cardinal rule: expecting the market to anticipate the inevitable supply losses stemming from the closure of the Strait. Through the lens of realized and visible inventory draws, there’s a reasonable argument that the initial price spike was a fear-induced overreaction to the Hormuz shock: not in scale, per se, but in timing.

Therefore, the best explanation for the pullback in crude pricing through April is the combination of (lack of) realized inventory declines as well as Presidential jawboning and the April 7th ceasefire. The world has stocks—both commercial and emergency—to buffer a temporary shock and, so, we’ve seen much of the pricing pressure manifest in the very front of the futures curve and into the physical market. Meanwhile, the White House’s desperate attempts to jawbone and talk down market reactions have distorted market sentiment. Most recently, the ceasefire materially shaved off some of the worst tail risks, including more direct attacks on regional production infrastructure, though has thus far failed to meaningfully reopen the Strait.

Nearsighted Curve

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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.

Also a reminder that paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

In the latest episode of the Oil Ground Up podcast, I spoke with Adi Imsirovic, a long-time oil trader who now lectures at the University of Oxford and has written many books on the history of oil trading, the mechanics of the Brent crude complex, and the theory of price discovery. Our discussion focused on the connection between the physical and financial (i.e., paper) oil markets and what record-breaking backwardation means for the oil market.

This week, I spoke with MacroVoices (podcast, 48:00-forward), Facts vs Feelings (video), Competent Man (video), MacroHive (podcast), and Wall Street Journal (print).

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Summary

Flat Prices fell by ~$5/bbl for Brent to finish just above $90/bbl following a violent, near $10/bbl rout in crude prices that followed an Iranian announcement that the Strait of Hormuz was “completely open” (many caveats, discussed below).

Timespreads pulled back sharply alongside flat pricing as prompt timespreads of all major benchmarks fell back to their least backwardated level since early March; however, Brent prompt spreads and DFL spreads are still at ~$4/bbl and these are well above any other “normal” period (prompt timespreads are typically measured in cents!).

Inventories data were mixed given a large counterseasonal US draw, a modest decline in European stocks, and a large inflow into Singaporean storage tanks; US crude stocks fell on the week for the first time in nearly two months as a large armada of tankers heads for the US Gulf Coast.

Refined Products markets saw diesel crack spreads plunge alongside crude back to just more than $52/bbl in NYH vs. Brent; gasoline refining margins have continued to march higher, finishing at >$35/bbl vs. a seasonal norm nearer $20/bbl.

Market Positioning data confirmed that speculators were net sellers of crude contracts, but that as of Tuesday their net position remained very elevated relative to the trend of the past year; while those positions have likely come in notably following today’s sharp selloff, they surely remain elevated and, should de-escalation continue, will begin to contribute more meaningfully to selling pressure.

As Well As Today’s “complete opening” doesn’t really change anything, yet; The US blockade that began on Monday; Still considerable work to arrive at any durable end to the conflict; Still down nearly 1bn barrels in the most optimistic view of the supply outlook; and The split between “physical” and “paper” barrels (spoiler: it’s all backwardation!).

What Happened This Week

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Below the paywall you will find the latest monthly edition of the Commodity Context OPEC+ Data Deck (50-page PDF), tracking groupwide and member-level official production estimates, quotas, compliance, exports, and official production data reconciliation vs output implied by visible movements.

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• Quota participating OPEC+ crude production fell -7,587 kbpd m/m to 28,312 kbpd in March, according to official OPEC secondary source aggregate data. This is the second-largest monthly production decline on record behind only the emergency OPEC+ cut in May 2020. In addition, this marks a fresh, all-time crude production low for the expanded producer group and, for the original OPEC members, this represents the lowest aggregate crude output since Operation Desert Storm in 1990.

• Despite the announcement of a ceasefire, the Strait of Hormuz remains effectively closed (see chart above); talks between the US and Iran in Islamabad over the weekend failed to result in any agreement. In response, Trump announced that the US would be blockading Iranian exports through the Strait going forward, further choking what little flow was still managing to get through Hormuz to global markets.

[Full PDF Deck and additional analysis below paywall]

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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.

Also a reminder that paid subscribers can access the latest weekly update of the detailed 40-page PDF Market Positioning Data Deck at the bottom of this report.

This week I joined the Loonie Hour (Video) and Shift Key (Podcast), and you can also find more of my thoughts about the evolving situation in the New Statesman (Print) and on CBC Power & Politics (Video).

On the latest episode of Oil Ground Up, I was joined by John Love, CEO of USCF Investments to celebrate the 20th anniversary of the United States Oil Fund (USO), widely considered the largest oil exchange traded product (ETP). We discussed the record backwardation in WTI, volatility parallels to April 2020, and US producers remaining cautious due to the inability to lock in high spot prices on the back end of the futures curve.

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Summary

Flat Prices collapsed by more than $14/bbl following the ceasefire announcement, marking the largest weekly decline since the start of the Iran War; Brent prompt futures (June delivery) are now sitting around $97/bbl while Dated Brent (spot) prices are sitting around $130/bbl after reaching an all-time high of $144.46/bbl on Tuesday, which outstripped the prior [nominal] all-time high set in 2008.

Timespreads pulled back sharply following the ceasefire announcement as prompt futures timespreads shed roughly half their backwardation; still, all major crude curves remain exceptionally backwardated and continue to scream for the release of any available inventories.

Inventories leaned bullish given a modest Stateside build and large draws across ARA Europe and Singapore; US crude stocks have reached high levels, concentrated around the US Gulf Coast, and are expected to begin drawing down more aggressively as empty tankers arrive to shuttle American barrels to Hormuz-starved importing regions; outside the US, inventory data is finally beginning to reflect mounting scarcity, especially of refined products.

Refined Products markets continue to signal that the greatest supply shortfalls are in middle distillates (i.e., diesel, gasoil, and jet fuel) but cracks did pull back notably after the ceasefire announcement (alongside crude); gasoline, meanwhile, remains relatively looser but crack spreads continued to climb despite the ceasefire news.

Market Positioning data revealed that speculators were small net sellers of crude futures and options contracts through Tuesday, though the sharp retracement of prices following the ceasefire—announced immediately after the end of the Commitments of Traders survey window—likely represents a considerable liquidation of what was excess speculative length.

As Well As Schrödinger’s ceasefire, the prospects for durable near-term peace in the Middle East, and what the future of the Strait and Gulf oil exports might look like.

What Happened This Week

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• North American petroleum liquids output, both upstream and downstream, cratered by more than -1 MMbpd m/m back below 30 MMbpd after cold weather-related challenges on the back of Winter Storm Fern. Winter conditions also notably boosted continental petroleum product demand, which was up by more than +1 MMbpd y/y.

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

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Hope you all enjoy some well-earned time off after an exhausting month in the oil market.

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.

If you’re looking for some more Iran war/oil market implications coverage, check out my conversations on Breaking Point (Video); Milk Road (Podcast); CBC Power & Politics (Video); and Hidden Forces (Podcast) as well as read my latest contribution to The Dispatch (Print).

🎙️ Podcast Double Header:

On the latest episode of Oil Ground Up, I was joined by Karim Fawaz, Energy Advisory at S&P Global, to discuss the market’s irrational Iran War optimism given the unthinkability of a long-term Hormuz closure and what destroying 10+ MMbpd of demand could actually look like.

And earlier this week on Oil Ground Up, I spoke with Gregory Brew at Eurasia Group about Trump killing the Carter Doctrine and how to think about the political contours of the Iran War on all sides of the conflict and how they constrain our path forward.

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.

Flat Prices slipped on the basis of prompt Brent futures contracts, falling ~$3.50/bbl to $109; however, that decline was driven by the expiry of the steeply backwardated May contract and the June contract actually ended nearly $4/bbl above last Friday’s close. On Thursday, Dated Brent spot prices hit $141.37, the highest level since 2008.

Timespreads continue to explode and set fresh all-time highs, with the Iran War supply loss being experienced through term structure far more than flat pricing; prompt timespreads of all major crude futures contracts, which we normally discuss in cents, have hit $10–$17/bbl.

Inventories data was mixed between draws across the US and Singapore and a crude-driven build in Europe; however, we still have yet to see the Hormuz closure scarcity show clearly in the high frequency inventory data, with crude stocks in the US and Europe actually rising faster than usual for this time of year.

Refined Products continue to be dominated by squeezed middle distillates, with diesel crack spreads sitting at their highest-ever seasonal levels; but, we’re beginning to see the refining pain spread to gasoline as well, which is seeing refining margins roughly 50% higher than seasonal.

Market Positioning data showed that speculators were net sellers of WTI crude contracts over the past week, though we’ll need to wait until next week for Easter holiday-delayed ICE commitments of traders data to be more confident in our current positioning picture.

As Well As adjusting our view to a longer war following Trump’s speech, the billion barrel cost of that longer war, weakening prospects of a near-term diplomatic resolution, Tehran’s future plans for the Strait of Hormuz, and the timeline for the arrival of the Hormuz “air pocket”.

What Happened This Week

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Last night, President Trump addressed the American people, and the world, to provide an update on the status and direction of the Iran War. While we didn’t learn anything new from the speech, Trump reaffirmed many rumours and previously-messaged talking points, and—unfortunately for the global economy—positioned us squarely down the path of a longer war that will continue driving oil prices higher.

We once again heard that the US is two to three weeks away from accomplishing all of its military goals—despite near-constant messaging through early March that the Iran war was only a week or two away from completion. Trump reiterated his belief that the US was roundly winning the war and that any energy price pain was a temporary but necessary cost. Trump also again stressed that the job of reopening the Strait of Hormuz will fall to those European and Asian countries that import their fuels from the Middle East, saying that “Those countries [should] grab it and take it and cherish it.”

What does that mean for the near-term oil market outlook? Let’s review.

Another Month with No Hormuz

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As I have previously mentioned, we have joined a rotating roster of energy sector specialists who will be contributing to the weekly Dispatch Energy newsletter, which is entirely free to read thanks to a sponsor so you should subscribe!

The goal will be to share some of the themes we regularly write about here at Commodity Context but at a higher level and for a broader audience. We will also be sharing those write-ups here for our regular subscribers. The main story from our fifth contribution, Are We Approaching an Unprecedented Energy Crisis?, is reprinted in full below. You can also listen to the story via the recorded voiceover.

Illustration by Noah Hickey/The Dispatch (Photos via Getty Images).

Welcome to Dispatch Energy! The Strait of Hormuz is the world’s most important energy chokepoint. This much has been well known and oft-mentioned for decades. Roughly 20 million barrels of oil—in addition to massive shares of other critical commodities, from liquefied natural gas to fertilizer—transit the narrow waterway daily. Or, rather, I should say, transited. Iran has effectively blocked the Strait of Hormuz—allowing very limited traffic in and out—since the U.S. and Israel jointly initiated the Iran war on February 28.

Let me be clear: If the Strait of Hormuz remains closed, there is no doubt that the global price of crude oil will explode to all-time highs. For context, I am not typically an alarmist about high-price forecasts. My first contribution to Dispatch Energy explored how the oil market was increasingly oversupplied, pushing prices lower. I was what many more price-optimistic oil market investors derisively referred to as a “glutter.” But the tables have very much turned. The continuation of the Iran war—and its possible escalation, through further attacks on oil facilities or boots on the ground—will, no doubt, force oil prices higher to (and potentially past) the peak of $147 per barrel in 2008 (about $223 in today’s money).

If the strait remains closed, the global oil industry will have no hope of filling that supply hole this year or next (or next). Even the fastest-responding sources of production, namely U.S. shale, simply cannot respond quickly enough or with anywhere near the required volumes. As inventories rapidly drain, prices will rocket higher to quell demand in a desperate effort to balance the equation. Destroying 20 million barrels of petroleum product demand per day is roughly equivalent to the peak of COVID-driven demand loss from March to April 2020, when roads were deserted and there were barely any planes in the sky. This time, the market will need to curb this magnitude of demand without mandated lockdowns.

So, let’s paint the theoretical picture of what destroying 20 million daily barrels of petroleum product demand would look like. In wealthy, advanced economies, there is almost no price too high. For example, I’m driving my kids to school in the morning regardless of the price at the pump. So, for me and most citizens of the global West and high-income Asia, this crisis will manifest as excruciatingly high prices that sap our disposable income—effectively a tax. All of the normal, energy price shock-related recessionary concerns will surface. But not everyone is so privileged. Poorer countries in the Global South won’t be able to afford those prices and, thus, won’t be able to incentivize the fuel cargo imports necessary to balance typical domestic demand. Put simply, these countries will experience the crisis as acute physical fuel shortages like the one Cuba is currently facing.

We should expect a disastrous lifestyle adjustment for people in those developing countries. The world will get smaller, power will be in shorter supply, and the tens—if not hundreds—of millions of people dependent on liquefied petroleum gas for cooking fuel will be forced to shift to dirtier biomass alternatives. We saw a now-infamous example of this shift during the energy price crisis, after the Russian invasion of Ukraine spurred a sudden and insatiable pull of global liquefied natural gas cargoes toward Europe in an effort to fill the massive gap left by the loss of Russian gas imports. As a result, some commodity traders broke term contracts for scheduled LNG deliveries to Pakistan to reroute to Europe, with the price difference more than covering any breakage fees.

And while there have been claims that the U.S., for instance, will be spared the effects of this energy price spike thanks to its newfound status as a net petroleum exporter, it’s important to remember that, when it comes to energy security of supply, a barrel of oil lost anywhere is a barrel of oil lost everywhere.

Just another supply crisis?

We’ve seen energy supply disruptions before, and commodities analysts are, admittedly, prone to sensationalism. So there may be temptation to draw parallels to the energy price shock of 2022 and, even, to call “boy who cried wolf.” But, while market panic was ultimately overstated in 2022, there is no doubt that the “wolf” is now here. There are two important differences between 2022 and 2026: The panic in 2022 was inflated by a pandemic-induced supply deficit, and the threatened 2022 supply crisis was relatively small.

First, a large part of the panic in 2022 was the preexisting, pandemic-induced supply deficit. The pandemic economic bullwhip effect had roiled energy supply chains since at least the latter half of 2021, as it had other industrial supply chains. Petroleum product demand was rebounding faster than expected thanks to the rapid vaccine rollout, while supplies floundered after being aggressively throttled by the combination of collapsing oil prices and the largest-ever production cut by OPEC+, a group of nations that controls crude output equivalent to around 40 percent of global petroleum output. Even more, U.S. production from the shale patch was recovering more slowly than expected due to the aforementioned supply chain bottlenecks, which caused shortages of everything from labor to steel pipes to frac sand. OPEC members, too, were struggling to lift output following rapid shut-ins and underinvestment.

In contrast, the world was actually oversupplied with oil heading into the Iran war. As outlined in October, global oil production was growing faster than demand heading into 2026. There was a widespread expectation that oil markets would be notably oversupplied to the tune of 2 to 3 million barrels per day and prices would, therefore, be under heavy downward pressure. But a surplus of 2 to 3 million barrels per day pales in comparison to the 20 million barrels per day of lost Hormuz flow.

Second, the threatened 2022 supply crisis never fully materialized. After Russia’s full-scale invasion of Ukraine in February provoked fierce backlash from Western countries, the International Energy Agency (IEA) warned in its April 2022 Oil Market Report that Russian oil production could fall by 3 million barrels per day—an unthinkable volume at that time. But Russian production didn’t fall by that volume. Instead, it dipped modestly for a month or two before recovering the prewar levels. On top of that, any oil market tightness was doused with water thanks to China’s draconian COVID-zero policies, which drove the first annual average decline in Chinese petroleum product demand in decades.

In contrast, the flow of disrupted oil through the Strait of Hormuz is seven times the feared loss and 20 times the realized loss of Russian supplies in 2022. While OPEC+ was forced to cut production in 2022 and continued cutting to stabilize prices through the end of 2023, a recession is the best-case scenario if the strait remains closed through 2026. The energy price spikes and forced demand shedding will be, very likely, depressionary.

Offset opportunities.

Fortunately, energy exports through Hormuz haven’t been entirely halted. Iran largely continues to deliver its oil to global markets through the strait unimpeded, which shaves 5 to 10 percent off the total loss. There is also the potential to shift some flows from the strait to pipelines around Hormuz. The largest pipeline option is Saudi Arabia’s East-West pipeline to the Red Sea, which could offset one-quarter of Hormuz’s normal flow. Built during the Iran-Iraq War in the 1980s with this exact contingency in mind, this pipeline could be used to reroute as many as 5 million barrels of oil per day (7 MMbpd total, 5 MMbpd pre-war unused space), according to Saudi Aramco, the Kingdom’s national oil company.

However, the pipeline alternatives have yet to live up to their touted potential. So far, we’ve only seen about half that volume rerouted through the East-West pipeline. Meanwhile, the risk of an Iranian strike on the conduit or the supporting infrastructure is ever-present, as is the threat of resumed attacks on global shipping in the Red Sea by the Iran-backed Houthis in Yemen. The United Arab Emirates has a pipeline that can move roughly half a million daily barrels to the Gulf of Oman (1.7 MMbpd total, 0.5 MMbpd pre-war unused space), but the termination point—the key blending port hub of Fujairah—has suffered repeated Iranian bombardment. Another set of pipelines could move more barrels from northern Iraq to the Turkish coast, but we haven’t seen much progress on that option based on tanker tracking data.

There is also temporary, policy-driven relief that can be provided to the market. Most significantly, we are seeing the largest ever IEA-coordinated release of strategic oil reserves, which, at 400 million barrels, is more than twice the 182 million-barrel record set in 2022. The U.S. Department of Energy has indicated that its own release contribution of 172 million barrels from the Strategic Petroleum Reserve would occur over 120 days. Globally, the release of 400 million barrels (which includes the US contribution) over the same time period means roughly 3.3 million barrels of daily outflow or replacement “supply.” In addition to the coordinated release, the U.S. Treasury has moved to temporarily waive sanctions on both Russian and, yes, Iranian oil. Tighter sanctions had made it difficult for both Russia and Iran to market their barrels, which left them stranded on tankers at sea. Both countries hold an excess of tens of millions of barrels that they’re likely to draw down now that those sanctions have been waived, contributing some additional effective oil supply for the first month of the Hormuz stoppage.

If all potential rerouting offsets are maximized—which they haven’t been yet—the Hormuz supply loss of 20 million daily barrels drops to around 13 million daily barrels. And the full brunt of that shortage can be further counteracted by waiving sanctions on excess Russian and Iranian oil on water and via the largest IEA strategic reserve release in history. But even accounting for these alternate supply routes, the global oil market is still left with a gargantuan supply deficit that will begin rapidly drawing down onshore commercial inventories. There is simply no other option: Traffic through the Strait of Hormuz must resume to stave off a cataclysmic economic shock.

Looking ahead.

With U.S. benchmark West Texas Intermediate (WTI) futures still below $100 per barrel, the closure of the strait hardly feels like a global crude oil emergency today. Oil prices are certainly higher than a month ago but far from all-time highs—and there’s been a flatlining over the past week or two. Clearly, financial markets continue to bet that President Donald Trump will pursue a quick end to the Iran war. But their optimism has proven unfounded thus far, and the stubbornly low price of oil is reducing any price-driven pressure on the White House to negotiate or back down.

And, for now, the U.S. appears to be the most movable participant in the Iran war. Israel will continue to pursue its goal of destroying the Iranian regime, and the Islamic Republic has remained recalcitrant on negotiations toward a ceasefire, demanding the recognition of its sovereignty over the Strait of Hormuz. Meanwhile, financial markets and energy prices in the U.S. will pressure the White House to try to avert the economic consequences I outline above. These considerations likely explain the shift in American war aims from regime change to the prioritization of reopening Hormuz.

Other countries have already begun to feel significant price pressures as a result of the war. The global benchmark for crude oil, Brent, is trading at more than $10 per barrel more than WTI—well above its usual premium. Barrels for immediate physical delivery in the Middle East are trading at more than $160 a piece. And jet fuel in Singapore has already spiked to more than $200 per barrel. What’s more, importers haven’t felt the real brunt of the lost supply yet. The loss of exports out of the strait is, effectively, an “air pocket” in the normal flow of barrels out of the Middle East, because tankers take roughly three to four weeks to transit to their destinations, namely Asia. Some of the tankers that departed the Gulf a month ago are still en route to their final destinations, but there’s nothing but air behind them. In other words, the “crunch” is coming and prices are on a precipice.

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.

Also a reminder that 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 modestly, ending the week just more than $1/bbl higher than last Friday’s close, but that small w/w change masked considerable volatility over the course of the week, with crude collapsing more than $15/bbl on Monday following a de-escalatory post from President Trump, before prices continued to grind their way higher again on the lack of any firm progress on reopening the Strait of Hormuz.

Timespreads strengthened further, with prompt Brent backwardation rising to >$7/bbl from $4/bbl and Brent DFL spreads—the closest to the physical spot market—rose to all-time highs of >$10/bbl; WTI also saw prompt backwardation more than double to more than $5/bbl from $2/bbl and Dubai remains the major benchmark futures contract with the steepest backwardation at >$10/bbl.

Inventories data, paradoxically, came in relatively bearish given builds across the US, ARA Europe, and Singapore, despite exploding backwardation across both crude and refined products curves; part of this can be attributed to the fact that physical scarcity is still taking time to arrive in the most visible markets and another part can be explained by an initial boost in stocks driven by precautionary demand that manifests are physical hoarding (also seen in 2022).

Refined Products remain dominated by convulsions in the middle distillates market, with US diesel crack spreads (vs. Brent) >$70/bbl, which, while down slightly from the $90/bbl high on Wednesday, is more than double where the year started; jet fuel remains the tightest of the middle distillate products, with Asia the epicenter of that tightness.

Market Positioning data confirmed a modest reduction in net speculative positioning in major crude contracts, which dovetails nicely with roughly flat prices; however, while speculative crude positions remain extremely high, both price gains in crude and crack spread improvements for diesel have notably outpaced any hot money inflows and, for diesel and gasoil specifically, refining margins have continued to soar despite pullbacks in spec positioning in middle distillate contracts.

As Well As presidential jawboning has kept crude prices in check but verbal efficacy is waning; colossal volume of shut-in Gulf production will take months to restart; and Ukraine intensifies attacks on Russian oil and gas infrastructure to ensure the Kremlin doesn’t profit off the Iran War.

What Happened This Week

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We have received numerous requests for a recording of the call for people who weren’t able to make it live, so I figured the easiest way to distribute was directly here.

Paid subscribers can watch the full hour-long Context Call recording above.

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This edition of the Global Oil Data Deck also explores some initial estimated Iran War impacts on global oil balances in addition to its usual tracking of global supply and demand developments.

This 73-page March 2026 edition of my monthly data-dense and visualization-heavy Global Oil Data Deck series (attached PDF below) is exclusive to paid Commodity Context subscribers.

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Overview

• The global liquids market tightened notably in January to its least oversupplied since summer driving season thanks to supply losses in the US and Kazakhstan combined with robust demand across all major regions. However, pre-Iran War surpluses feel like a distant memory today.

Iran War Oil Market Balance Impacts

• Market balance impacts from the Hormuz Stoppage are two-fold: production losses (i.e., confirmed shut-ins) and supply losses (i.e., the “air pocket” in normal exports that will hit importing nations). Confirmed production shut-ins alone are expected to push the oil market into its largest deficit on record through the end of March, and the full brunt of supply (i.e., Gulf export) losses will roughly double the immediate market impact of those realized production losses if Hormuz flow remains shut.

Full discussion of Iran War market balance impacts as well as the entire regular monthly update of the Global Oil Data Deck (73-page PDF report on monthly supply and demand fundamentals) and flow-level analysis available for subscribers below the paywall

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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.

Also a reminder that 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.

Media Roundup: Quite a bit of long-form content this week if you are looking for something to fill your ears over the weekend, including Monetary Matters (YouTube, 1h23m), New Statesman (YouTube, 29m), Know Your Risk (YouTube, 51m), MacroVoices (second half, 1:02-1:54). As well as Iran War Puts Global Energy Markets on the Brink of a Worst-Case Scenario (Wired, print), What Does a Global Oil Shock Mean for Canada (TVO, video), and my HBR Interview if you haven’t read that yet (The Oil Shock Is Here. And We’re Just Beginning to Feel It.).

On the latest episode of the Oil Ground Up podcast, I was rejoined by my good friend Matthew Reed, Vice President at Foreign Reports, to discuss how the Iran War could possibly end. I’ve been pretty open about my view on what I see as the inevitable end (i.e., Trump will pull back sooner than later); so, I asked Matt to challenge that argument, which he did very well, as well as helping provide a better sense of how this war was being perceived by the Gulf producers on the ground.

Summary

Flat Prices rose ~$7.50/bbl for Brent to close above $110/bbl, which is down a notable $10/bbl from Thursday morning’s high but still a steady weekly appreciation; WTI is lagging Brent by nearly $10/bbl while Middle Eastern grades are charging an ever-greater premium.

Timespreads continue to indicate acutely tight markets, especially compared to the weakness seen immediately prior to the onset of the Iran War; Middle Eastern benchmarks carried on with record prompt backwardation as the epicenter of the acute supply loss.

Inventories major commercial storage hubs still have yet to feel the brunt of the Iran War Hormuz stoppage but the effect can already be seen in total Middle East-origin oil on water, which has fallen by a staggering 12.5 million barrels per day; commercial inventory data was mixed but leaned bullish as large draws in ARA Europe more than offset small builds for the US and Singapore.

Refined Products markets remain dominated by achingly-insufficient middle distillates supply, with US diesel crack spreads topping $80/bbl: double pre-war levels, the highest ever seasonal level, and rapidly catching up to the all-time highs of ~$100/bbl realized in April 2022.

Market Positioning data revealed that net position in major crude futures and options contracts currently held by speculators is far and away the highest in the past year, at its highest level since early 2025 as a share of total open interest and in net nominal barrel terms the highest since 2021. However, despite this inbound flood of hot money, the pace of price appreciation is notably outstripping the normal expected contribution from the speculative inflows leaving panicked physical market participants in the driver’s seat of crude price discovery, a trend even more evident in exploding middle distillate refining margins.

As Well As Iran War escalation destroys upstream facilities and hits Red Sea facilities, OPEC and the IEA (bizarrely and disconcertingly) singing the same tune on the severity of the supply crisis, oil’s time space shockwave driving a wedge between major crude contracts, and war insurance costs spike but economics of the Hormuz stoppage should cover the sky-high premiums.

What Happened This Week

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The 2022 energy price crisis serves as the most recent parallel to our current acute energy supply crisis, but it’s also incredibly different—and woefully insufficient a point of comparison—in many important ways. Amongst other topics in this lengthy Q&A with Harvard Business Review’s Thomas Stackpole, I provided some of my thoughts on the parallels and more important differences between the ongoing Iran War, which has prompted the oil industry’s most severe supply crisis in its history, and Russia’s invasion of Ukraine, which prompted our last energy supply crisis in 2022. Below you will find an excerpt from that discussion, and I encourage you to check out the full conversation.

(Excerpt)

How instructive do you think 2022 is? How are the situations similar and how are they different?

The main similarity is panic, but most of the underlying fundamentals are actually very different. Going into 2022, we had a very, very tight oil market. OPEC had cut a bunch of production in 2020 [during Covid-19] to balance the market, which I think was the right call by OPEC at the time because it saved us from an even more extreme bullwhip effect. But you saw this massive loss in supply as demand cratered. Thankfully, demand and the global economy recovered much more quickly than people expected, but we didn’t have the supply to keep up with it. Inventories were being drawn down and even before Russia’s invasion of Ukraine, and prices were heading back toward triple digits.

Then Russia invaded Ukraine. The big scare was that the International Energy Agency’s April report said that the combination of import bans and restrictions from the West would create a 3 million barrel a day loss of Russian supply. I remember thinking like, “Wow, that’s a crazy big supply loss.” In the end, though, we lost a million barrels a day and then it basically came back.

Right now, going into this, the market was quite loose. We actually were staring down a 2–3 million barrel a day surplus. OPEC had hiked a bunch of production. The global demand was good, but not stellar. And overall it looked like inventories were building and were going to press prices lower. If anything, we didn’t see lower prices last year because of the aggressive sanctions policy from the White House toward Venezuela, Iran, and Russia.

What’s happening today is about the difference between the fear of losing 3 million barrels from Russia and the 20 million barrels actually lost in closing the Strait of Hormuz. We’re talking about a seven-fold increase in the supply loss. And again, we never lost the three million barrels [after Russia’s invasion of Ukraine], but we have in fact lost the 20 million barrels per day from the market right now.

So, this crisis is really just on a completely different scale.

Right now, I think a lot of people are saying, “Well, we dealt with Russia really well. That ended up being kind of a nothingburger. The system showed how amazing it was at adapting to these types of shocks.” I think there’s a sanguinity in the market right now of, “Surely they’ll figure it out again.” And the system is attempting to reroute. There’s the east-west pipeline in Saudi Arabia, which can move—although we haven’t seen this proven yet—upwards of 5 million barrels a day of that 20 million from the Gulf to the Red Sea. Now there, the Houthis could become an issue again as we saw a few years ago. But that’s the single biggest offset. Then you have all of that sanctioned oil from Russia and Venezuela floating around.

Right now, Russia is the single largest beneficiary of this war. The Trump White House, to its credit, had actually done a very good job at tightening restrictions around Russia, and prices were getting much, much worse for Moscow. That was accomplished over eight months, and in two weeks of this war, all of that’s already been undone. India’s been scrambling for Russian barrels. Everyone’s been scrambling for Russian barrels to the point that even Eastern Europe has been clamoring to Brussels saying, “Can we ease some of these restrictions on Russian imports into the EU?” Because the massive pipeline that used to supply us would be really, really handy in this global oil shock.

Then the International Energy Agency (IEA) announced a major Strategic Petroleum Reserve release: 400 million barrels over roughly 120 days. That’s roughly 3.3 million barrels a day of flow back into the system—which, if we were in 2022, would be a staggeringly large number, but still very small relative to the loss we have.

Be sure to check out the rest of the full conversation for more.

You will also find early running estimates of current Gulf producer crude output cuts and shut-ins below as a running tally of the damage already wrought by the Hormuz stoppage.

Below the paywall you will find the latest monthly edition of the Commodity Context OPEC+ Data Deck (50-page PDF), tracking groupwide and member-level official production estimates, quotas, compliance, exports, and official production data reconciliation vs output implied by visible movements.

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 +354 kbpd m/m to 35,928 kbpd in February, immediately before the onset of the Iran War, according to official OPEC+ secondary source aggregate statistics, mostly driven by the ongoing rebound in beleaguered Kazakh output.

• Crude production shut-ins across the Gulf have risen to roughly 8.5 MMbpd as of latest count, based on ongoing industry reports. Iraqi production has been hit hardest, down more than two-thirds with most of the production in the Southern Basra fields currently offline. Kuwaiti and Emirati production is currently sitting around 50% of pre-war levels, contributing 1.3 and 1.7 MMbpd of confirmed shut-ins each, with all of the UAE’s offshore production now reportedly shut-in. Finally, Saudi Arabian production, which is most sheltered from the Hormuz stoppage thanks to the East-West pipeline offset, is believed to have reduced upstream production by 20-25%.

[Full PDF Deck and additional analysis below paywall]

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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.

The Iran War remains the overwhelming story in oil markets, which prompted an exceptionally busy week(s) in media, so I wanted to share some of those hits for you here: the Odd Lots podcast (Spotify), the RenMac Offscript podcast (video), CNBC Asia (video), Jimmy Conner’s Bloor Street Capital podcast (video), the Breaking Points news show (video), the Financial Post (video), the CGAI Energy Security^3 podcast (audio), as well as being quoted in the New York Times (print), Reuters (print), the Globe and Mail (print), Atlantic (print), New York Magazine (print), The CBC (print), The Canadian Press (print), and, of course, my prolific Twitter posting.

In the latest episode of the Oil Ground Up podcast, I spoke with Nader Itayim of Argus Media for a view on the Iran War from one of my absolute favourite OPEC and Middle East oil analysts, reporting from the Gulf.

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Summary

Flat Prices rose nearly $11/bbl for Brent to end trading around $103.50/bbl, the highest close since the summer of 2022 as the Iran War continued on into its third week; and even those sky-high Brent futures prices fail to reflect the true extend of physical market tightness as physical premia for Dubai barrels soared above $40/bbl vs Brent.

Timespreads actually weakened (modestly, Brent crude) but, this softening is being driven by longer-dated contracts rising more quickly than prompt and Brent prompt backwardation did briefly hit an all-time high of >$9/bbl in early Monday trading; across the major crude benchmarks, Dubai is sporting the steepest prompt backwardation, followed by Brent, and then WTI—even then, WTI is markedly stronger compared to its near-contango status of only a couple weeks ago.

Inventories data was relatively uneventful and remained largely inconsequential given the clamour to price in forward risk, amidst the largest supply shock in its history, rather than sweating the specifics of flows the landed weeks ago.

Refined Products continue to be dominated by middle distillates, the tightness in which is outstretching even what we’re seeing in crude; US diesel refining margins have soared above $60/bbl and Singaporean jet fuel is volatile but the single tightest target, closing the week with a flat price in excess of $200/bbl.

Market Positioning data confirmed that speculators returned as net crude buyers over the past week, though their purchases still fail to explain the extent of crude prices gains (and, thus, points to physical participants driving the bus of price discovery); spec shorts hit their lowest level since 2024, while net speculative positioning as a share of total open interest in major crude contracts is at its highest level since immediately preceding Trump’s second inauguration.

As Well As crude prices continue steadily grind higher on the back of Hormuz stoppage, physical markets are acutely outstripping the performance of comparatively sanguine paper barrels, assessing the viability of bilateral and Iran-brokered Hormuz shipping passage deals, the Trump administration looks to Russia for oil supply relief, and Trump flip-flops on oil targets to reframe high oil prices as a boon for America, harkening an ever-longer White House appetite for the Iran War.

What Happened This Week

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Despite the ongoing sanguinity in oil markets, the situation in the Middle East remains a truly existential threat to global fuel supplies and, by extension, the broader global economy. To share some of my growing anxieties, I had the pleasure of rejoining Joe Weisenthal and Tracy Alloway on Bloomberg’s Odd Lots podcast to discuss the Iran War, the closure of the Strait of Hormuz, and how the market would attempt to “solve” for such a sharp, sudden, and massive loss of supply via ever-higher prices.

I encourage you to check out the podcast (Bloomberg link, Spotify link) in addition to our latest update on the disruption in the report below.

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We’re now nearly two full weeks into this mess and the Middle Eastern oil trade remains functionally frozen. Fundamentally, the normal flow of traffic through the Strait must resume or the oil market will break the global economy. Every day the global oil market gets 15+ million barrels tighter. We’ve already lost more than a quarter billion barrels of oil supply, thus far, in the Strait of Hormuz stoppage—that’s not a sustainable pace, and no US president will tolerate for long the price spikes that are bound to follow.

Meanwhile, the White House is wavering and the market seems shockingly sanguine? Crude prices did rocket ~$25/bbl higher when Asian markets opened Monday morning, as Brent reached almost $120/bbl before pulling back, but prices bled back toward $100/bbl through most of Monday trading. Then, prices cratered more than $15/bbl in the span of 30 minutes on Monday afternoon following President Trump’s proclamation that US military operations against Iran were “very complete, pretty much”. Shortly thereafter, Trump backtracked, saying that the US would “go forward more determined than ever”, Confused, yet? The market certainly is.

Today we’ll cover what Trump seems to want out of the Iran War, efforts by Gulf exporters to divert shipments around the Strait of Hormuz, and the latest record-setting strategic petroleum reserve release coordinated by the International Energy Agency.

Let’s dig in.

Trump’s Trophy?

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Happy Friday, Oil Watchers!

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.

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 surged higher as the true extent of the US-Israel-Iran war sunk in for market participants; Brent was ~+$20/bbl to finish around $93/bbl, the highest close in more than two years and the largest weekly gain since March 2022 (i.e., Russia’s invasion of Ukraine).

Timespreads have exploded across all major benchmark grades; prompt spreads and Brent DFLs went from modestly backwardated—even sinking into outright contango last week—to astronomically backwardated, at $4–6/bbl as of trading today, as refineries scramble to secure every possible barrel.

Inventories data leaned incrementally bearish last week given modest builds across all major tracked hubs; but, data is as of the day immediately prior to the US and Israel launching their combined assault on Iran and traders aren’t currently pricing crude on where stocks stood last week—they’re pricing barrels on where things might be or, rather, where they might not be next week.

Refined Products were again dominated by gigantic moves in the relative price of middle distillates including diesel, gasoil, and jet fuel, especially in Asia; US diesel crack spreads rose by more than 50% on the week, while Singaporean jet fuel margins rose by 300% as Asian refineries preemptively

Market Positioning data revealed that speculative participants were only small net purchasers of crude contracts over the past week-through-Tuesday, though that statement masks large gross reductions in both long and short positions as speculators flee the volatile market; given the relatively modest net increase in spec positions (vs. price gains), we can imply that virtually all the week’s price action was driven by panicked refineries buying virtually every barrel not on the wrong side of Hormuz.

As Well As Oil prices remain well below where they should be given the current trajectory of effective closures in the Strait of Hormuz, Trump admin flailing on oil price spike, refined products impact will front-run crude as the relative value of middle distillates soars, Saudis tap emergency pipeline plan, and why Moscow is the greatest immediate beneficiary of the war against Iran.

What Happened This Week

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This 47-page March 2026 edition of my monthly data-dense, visualization-heavy North American Oil Data Deck is exclusive to paid Commodity Context subscribers (attached PDF below paywall). The deck contains detailed and decomposed accounting for US, Canadian, and Mexican upstream (i.e., production) and downstream (i.e., refining) oil activity as well as end-user demand.

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• North American petroleum liquids output slipped -353 kbpd m/m from November’s all-time high to 31, 075 kbpd in December, the lowest level since August, with year-over-year gains slowing to +824 kbpd; monthly declines were driven by the US, which was crude output slip for the second consecutive month, while Canada held steady and Mexico actually notched the first month of y/y growth since 2023.

• Continental refined product demand rose a hefty +474 kbpd to 25,551 kbpd in December, up +429 kbpd y/y with growth driven primarily by the US and Mexico, while Canada slid on the month.

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

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Strait of Hormuz tanker map; source: Vortexa

The United States and Israel began bombarding Iran on Saturday morning local time, thrusting the oil market into its most perilous situation since Russia’s invasion of Ukraine in 2022. We are now actively speed-running the single greatest threat to global oil supplies: the combined risk of (1) some kind of closure of the Strait of Hormuz and (2) Iran launching attacks against upstream production assets across the Gulf. No surprise, prices popped roughly $10/bbl higher to $82/bbl Brent when futures opened; but, those prices backslid pretty quickly to a still very impressive $79—up roughly $7 from Friday’s close.

Let’s dig in.

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