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.

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Summary

Flat Prices rose ~$9/bbl from last week’s close for Brent crude to end Friday trading around $97/bbl, reaching as high as $102/bbl on Thursday amidst escalation between the US and Iran as well as the partial direct entry of the Houthis via threats to Saudi Red Sea shipping.

Timespreads exploded into steeper backwardation, with Brent DFL’s leaping from ~$1/bbl to a peak of $8/bbl before pulling back to around $5/bbl on Friday; Brent is currently seeing the greatest tightness but all major crude grades ratcheted into steeper backwardation as prompt tightness returned alongside re-piqued and broadening Middle Eastern supply risk.

Inventories broadly rose over the past week driven above all by a NGL-heavy build in the US; the previously aggressive pace of stock draws has waned, though overall inventory levels remain depleted across the US, ARA Europe, and Singapore.

Refined Products rolled over after weeks of ramping prices, with US diesel crack spreads giving up $5/bbl vs Brent this week and gasoline margins crashing $10/bbl; however, like with inventories above, while lower on the week, both US gasoline and diesel crack spreads remain at all-time seasonal highs without much immediate structural relief in sight.

Market Positioning data confirmed that speculators were once again net-buyers of crude futures and options contracts, though the positioning swing continues to run weaker than you’d expect given the pace of price gains, a bullish combination confirming likely additional, non-speculative pressure involved in pushing those prices higher.

As Well As in search of a true TACO clearing price, and Yemen’s Houthis opened a second Strait-front in the Bab el-Mandeb.

What Happened This Week

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As part of our ongoing efforts to improve upon and standardize analytical views subscribers will find updated petroleum supply monitoring exhibits for the world’s top-10 global producers.

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Overview

• The global petroleum liquids market remained in steep deficit through May amidst the ongoing Hormuz stoppage; visible inventory declines accelerated, led by global strategic reserves.

• Over the past couple of weeks, global oil markets have rocketed back to strength following the collapse of the US-Iran MOU ceasefire and the resumption of broader attacks against both tankers and military assets in the region. Crude has added nearly $30/bbl from its early-July lows with Brent crude threatening to break back above $100 at the time of writing.

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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.

🎙️ On the latest episode of Oil Ground Up podcast (spotify), I was joined by the one and only Jeff Currie for a wide ranging conversation about the theory and reality of crude price discovery running into the shock case study of the Hormuz Crisis. Another special aspect of this conversation with Jeff is that we’re evolving and this is the first time we’ve published the video of our conversation.

For more public oil market context, check out my comments to Bloomberg (print) and Al Jazeera (print), as well as my conversations with the Competent Investor podcast (video) and the Palisades Gold Radio podcast (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 $12/bbl—the largest weekly gain since mid-April—as Brent settled around $88/bbl on the back of (1) sharply-elevated Middle Eastern supply risks, (2) the renewed collapse of Hormuz transits, and (3) the prospect of an even longer disruption to the world’s most prolific oil supply line; prices have now fully round-tripped the post-MOU selloff.

Timespreads ripped from minor prompt Brent crude contango last Friday to backwardation of nearly $2.50/bbl on Tuesday, ending the week around $1.80/bbl; other crude benchmarks joined the steepening (to a lesser extent), with WTI and Dubai prompt spreads sporting prompt backwardation of $0.50–0.75/bbl.

Inventories data came in particularly bearish, dominated by the largest headline build in US commercial stocks since last September—though the bulk of the US headline build was NGL inflows; ARA Europe also flipped to builds while Singapore saw draws moderate.

Refined Products felt the mounting supply concern, with diesel crack spreads hitting fresh crisis highs of more than $85/bbl and gasoline cracks rising back to retouch crisis highs above $55/bbl.

Market Positioning data revealed that speculators were massive net buyers but, even with this upswell, positioning risk still remains firmly to the upside between still extremely high short interest and only middling gross length.

As Well As a rundown of this week’s flurry of back-and-forth strikes in the Middle East, the impacts to Hormuz flows, the potential for escalation through the weekend, and a more-serious readying of a Houthi intervention in the Bab el Mandeb Strait.

What Happened This Week

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• Quota participating OPEC+ crude oil production rose +1,183 kbpd m/m to average 26,177 kbpd in June, the highest level since February 2026 immediately preceding the onset of the Iran War.

• However, these production increases are entirely dependent on the continued recovery in crude oil loadings in the Persian Gulf, which has begun to roll over alongside the ramp in US-Iranian tit-for-tat strikes and the renewed collapse of traffic through the Strait of Hormuz.

• The producer group continued to lift its production quota by 188 kbpd for August, leaving only one remaining monthly hike until the second 1.66 MMbpd production cut tranche (initially announced April 2023) is completely unwound; the next question will be how quickly OPEC+ rolls into an unwinding of the final remaining cut—the only official all-member cut—of 2 MMbpd that was initially announced in October 2022, an unwind that could begin as soon as October.

[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.

In the latest episode of the Oil Ground Up podcast, I was rejoined by Gregory Brew, Eurasia Group Sr. Analyst for Iran and Energy, to discuss the fragile peace in the Middle East and why the post-MOU order in the Strait of Hormuz remains fundamentally unstable. (Note: this conversation was recorded immediately before the mid-week escalation in strikes, but I believe Greg’s views still hold up well on what’s motivating the key actors and how far they’re likely willing to go.)

For more public oil market context, check out my conversations over the past week with CNN (video), DW News (video), Global News (video), The Commodities Show with Morgan Downey (video), Geopolitics & Empire (video), and 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 registered the largest weekly gain since mid-May, up $4/bbl on the back of the greatest threats yet to the durability of the US-Iran MOU; both sides exchanged protracted fire as Tehran continued to attempt to force compliance with its control of Hormuz.

Timespreads recovered as Brent moved temporarily back into prompt backwardation from last week’s deepening contango; Brent ended the week stronger but still in very modest prompt contango after rolling over alongside flat prices from Wednesday’s high.

Inventories data registered across-the-board draws in the US, ARA Europe, and Singapore, with the pace of drawdowns re-accelerated stateside while slowing modestly in Singapore and ARA; the fact that the first US commercial crude build since mid-April was (1) swamped by SPR draws and (2) further swamped by refined product draws is an excellent summary of the current state of the oil market.

Refined Products markets remain far tighter than crude, caught between Russia’s diesel ban announcement (bullish) and Beijing loosening fuel export restrictions (bearish cracks, bullish crude); while I would have expected the Russian diesel ban to have been priced in ahead of time, the news was met with an aggressive $10/bbl intraday spike in US diesel margins.

Market Positioning data confirmed that speculators were actually once again net sellers of crude futures and options contracts despite the bounceback in prices between the weekly survey windows; this is a bullish print that indicates prices managed to bounce with no depletion of still-growing spec short covering impulse.

As Well As parsing the most violent week in the Strait of Hormuz since the signing of the MOU, which has understandably further stunted the already-slowing pace of shipping traffic in the region; and what do we know about the lower limit on the US SPR’s fill rate?

What Happened This Week

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As always, we’re posting a recording of the call for oil watchers who weren’t able to make it live.

There’s a ~6:30 minute preview of the call available to all subscribers that covers an update to Hormuz transit traffic, and paid subscribers can watch the full ~70-minute Context Call recording above.

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.

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Our latest contribution to the Dispatch Energy newsletter, Is Big Oil ‘Price Gouging’? is reprinted in full below. You can also listen to the story via the recorded voiceover.

Welcome to Dispatch Energy! Oil flows are lurching toward recovery in the Strait of Hormuz, and crude oil markets have softened from their historic rally. But you may not have even noticed this near-total return of crude prices to prewar levels if you filled up your family’s car over the holiday weekend. For crude oil, market indicators are signaling at least short-term oversupply, given a rush of long-stranded tankers exiting the Strait of Hormuz and still-weak Asian import demand amid China’s ongoing buyers’ strike. Indeed, West Texas Intermediate (WTI) crude prices are back below $70 a barrel, even amid continued instability in the Middle East.

Despite WTI crude prices being roughly the same as last summer, current consumer prices are materially higher. Average U.S. gasoline prices are sitting around $3.80 per gallon—down from more than $4.50 in May but still considerably higher than February’s less than $3.00 and last summer’s average of $3.15. U.S. diesel prices are even more elevated at $4.80 per gallon, down from $5.70 in May but more than $1 higher than the same time last year.

Satellite view of burning storage tanks and heavy smoke following attacks on the Kerch fuel terminal on June 21, 2026. (Photo by Gallo Images/Orbital Horizon/Copernicus Sentinel Data 2026)

Elevated gas and diesel prices have frustrated President Donald Trump, who in a series of Truth Social posts accused “big oil companies” of keeping gas prices high in order to “gouge” American consumers. “DROP YOUR PRICE FOR OUR GREAT AMERICAN PEOPLE,” he wrote in one post, citing $2.50 per gallon as his desired price. Treasury Secretary Scott Bessent followed up these presidential appeals with his own call for companies to lower prices ahead of the country’s 250^th July 4 celebration last week, ominously saying “we’re watching.”

Meanwhile, the American Fuel and Petrochemical Manufacturers published a brief explainer about what these fuel margins mean and don’t mean. It’s clear that the group, representing the U.S. refining and petrochemical industry, is sensitive to the mounting rhetoric from the Trump administration.

The challenge for the Trump administration is that, while certainly related, crude oil and its refined products (gasoline, diesel, jet fuel, etc.) are all distinct commodities. Each has its own balance of supply and demand: The supply of refined products isn’t driven by how much crude oil is pumped out of wells in the southwestern United States’ Permian Basin—or even released after four months stranded in the Persian Gulf. Instead, the supply of refined products depends on how much of that crude oil is processed each day in the world’s more than 500 oil refineries.

Therein lies the problem: Global refinery capacity is currently struggling to keep up with demand for petroleum products. Let’s say that we have 100 units of crude and 100 units of refined product demand but only enough refinery capacity to process 80 units of crude into 80 units of refined product. This is the reality of the oil market today: There is too much crude, which is crushing crude oil prices, and not enough refined products, which is spiking consumer prices.

This difference—between the price of crude and the price of refined product—is known as the “crack spread.” It’s called this because, very simply, a refinery is a giant chemistry set that “cracks” the dense hydrocarbons in crude oil into various lower-density products, like gasoline and jet fuel. Unlike our simplified model above, a refinery can’t transform a single barrel of crude oil into an equivalent volume of gasoline; instead, it produces fractions of a barrel of the entire rainbow of refined products—from the heaviest materials (e.g., asphalt) to middle distillates (e.g., diesel) to the lightest elements (e.g., propane).

The price of a barrel of Brent crude oil currently sits around $75, whereas a barrel of U.S. gasoline is fetching $125 (a $50 per barrel crack spread, compared to a seasonal norm nearer $20) and a barrel of diesel is going for more than $140 (a $65 per barrel crack spread, compared to a seasonal norm nearer $20). The crack spread is the primary driver of refinery profitability, and, for multiple reasons, refined product markets are currently much tighter than crude markets.

Let’s start with the direct impacts of the closure of the Strait of Hormuz. The prewar flow of some 20 million barrels daily through the Strait of Hormuz consisted of roughly 15 million barrels of crude oil and 5 million barrels of refined products. While offsetting pipelines in Saudi Arabia (to the Red Sea) and the United Arab Emirates played a critical role during the Hormuz crisis, these pipelines carried only crude oil, not refined products. The same goes for the release of strategic petroleum reserves: Virtually all of this volume was crude oil rather than diesel or gasoline.

Then there are the broader impacts of the Iran war and, specifically, China’s abrupt cut of nearly half its prewar crude oil imports, dropping roughly 5 million barrels per day from February. On one hand, this was the single largest unexpected factor that helped defuse the worst of the oil market crisis by massively reducing crude oil demand and loosening historically tight seaborne crude markets. On the other hand, it further tightened global refined product markets. Domestic Chinese refining activity cratered and Beijing imposed strict controls on Chinese fuel exports to safeguard domestic supplies through the Hormuz crisis.

These actions also reduced refined fuel exports from the rest of Asia and sent ripple effects through the global industry. As S&P Global explained in an analysis of the supply squeeze, “Octane blending economics have deteriorated as Asian steam crackers curtail operations due to reduced Middle East naphtha exports, tightening global supplies of high-octane blending components, including reformate and aromatics.”

The next reason is Russia’s domestic fuel crisis, the largest since the fall of the Soviet Union, amid relentless Ukrainian drone strikes. Ukraine has targeted Russian energy facilities for years, but there was a renewed surge in attacks through the Iran war as Kyiv attempted to prevent Moscow from profiting off war-related spikes in global pricing. Estimates from Energy Intelligence indicate that nearly one-third of Russia’s total refining capacity, or more than 2 million barrels a day, was offline due to these attacks through June, with domestic refining runs at their lowest point in more than two decades. And the attacks look poised to continue: just this week, Ukrainian drones managed to strike Russia’s largest refinery, located deep in Siberia and roughly 2,700 kilometers from Ukrainian-held territory, knocking it offline.

Without domestic refining capacity, Russian seaborne refined product exports have fallen from nearly 2.5 million barrels a day to less than 1.7 million, according to ship tracking data from Kpler. In addition, Moscow has banned the export of gasoline and jet fuel and is weighing a ban on diesel exports (Note: since publishing, Moscow has confirmed this ban). Russia is one of the world’s largest seaborne suppliers of diesel, so this is another considerable hit to refined product supply.

While Chinese and Russian exports cratered through the Hormuz crisis, U.S. exports surged. Both diesel and jet fuel exports, as well as crude exports, hit record highs in recent months. American refineries maximized jet fuel output to help satiate that particularly starved market. Meanwhile, gasoline’s share of refining yield fell to levels only previously seen during the depths of the COVID pandemic in 2020 and amid the housing market crash of 2008. And we can clearly see this domestic supply tightness in inventory levels. U.S. gasoline stockpiles are at the lowest seasonally adjusted level since 2014, while U.S. diesel stocks have only recently begun to climb back after hitting their lowest seasonally adjusted levels in 30 years.

Finally, there is one additional, U.S.-specific policy factor further stoking domestic refined product prices: the exploding value of renewable identification numbers, aka RINs. Contributing materially to the higher price of U.S. fuel, RIN prices have more than doubled this year due to a sharp increase in the 2026 biofuel blending obligation, especially for biodiesel and renewable diesel. The Environmental Protection Agency sets renewable fuel volume requirements under the Renewable Fuel Standard. Refiners and importers of gasoline or diesel then satisfy those requirements by acquiring and retiring RINs, compliance credits that are generated by blending renewable fuel or buying excess RINs generated elsewhere.

So, it’s a good news, bad news story for the efficacy of the deal that the U.S. and Iran struck to resume shipping in the Strait of Hormuz.

The good news is that shipping traffic through the waterway has recovered more quickly than feared, although the sustainability of the rapid recovery has yet to be determined. This exiting Hormuz surge, combined with the still-weak state of import demand, especially in China, has pushed crude prices back to prewar levels.

The bad news is that Trump clearly expected pump prices to follow crude oil’s rapid pullback just in time for the midterm elections, and so far they have not. The lagged effects of the Hormuz crisis, Ukraine’s success in crippling Russia’s refining sector, and his own administration’s biofuel policies have worked together to keep pump prices stubbornly high.

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.

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• North American petroleum liquids production advanced +188 kbpd m/m to 31,350 kbpd in April (+1,354 kbpd y/y) on the back of a reacceleration of output growth in both Canada and the US; what was expected to be the beginning of the US shale patch’s price-driven contraction was delayed by the scorching Iran War rally, which allowed many producers to hedge forward and de-risk further volume growth.

• Continental petroleum product demand rose +177 kbpd m/m to 25,165 kbpd in April (+491 kbpd y/y) as slowing Canadian consumption was offset by booming demand in the United States and modest growth in Mexico.

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

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8:00-9:00am MT / 10:00-11:00am ET / 2:00pm-3:00pm GMT

Join me for a brief presentation and Q&A on the latest and rapidly evolving post-MOU status of shipping flows out of the Strait of Hormuz, the ongoing depression in China’s crude import appetite, and the emergence of the “mini-glut” currently being digested by oil markets.

[Link for Commodity Context paid 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.

For more oil market context, check out my conversations with and contributions to the MacroVoices podcast (audio), Politico (print), Reuters (print), and the Globe and Mail (print).

Member Exclusive: Context Call on Wednesday, July 8, 2026

Subscribe for details and registration link; paid subscribers will find link below paywall

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Summary

Flat Prices were effectively flat this week with Brent ending around $72/bbl; all eyes continue to track shipping activity developments through the Strait of Hormuz as well as evidence of production restarts across the Middle East, while sentiment remains dour and speculators continue to put downside pressure on prices.

Timespreads remained weak as all major crude benchmarks are either in or on the edge of prompt contango; the market is digesting our current “mini-glut” caused by a surge in exiting Hormuz barrels running up against Chinese-depressed import demand.

Inventories data flipped back to unanimously bullish thanks to draws in all three major trading zones; commercial stocks remain low and continue to draw counterseasonally across most regions and product groups, on top of the ongoing record drawdown in strategic reserves.

Refined Products continue to materially outperform crude: both US gasoline and diesel crack spreads are sitting at the highest seasonal levels on record—at >$50 and >$60 per barrel, respectively—and the highest-ever levels relative to the sinking crude price.

Market Positioning data revealed that speculators were once again notable net sellers of Brent crude futures and options contracts, while broader data published by the CFTC was delayed this week due to the US holiday and will be published on Monday.

As Well As Canadian oil goes further global with new westbound pipeline proposal, and Russia’s refinery crisis bolsters product cracks and further weighs on crude markets.

What Happened This Week

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• The recovery in Hormuz flows—in both directions—is running ahead of expectations, especially in terms of inbound, empty tankers that are needed to resume fresh loadings; obvious risks remain given Tehran’s still-unsettled claim over control of the Strait.

• Fresh loadings have notably improved and, with them, estimated upstream production; however, the recovery in upstream production is lagging empty tanker capacity, which indicates a bottleneck is upstream of shipping flows.

• Production recovery has been uneven and volatile across the Gulf: the UAE’s recovery has been the strongest, Kuwait’s recovery has been choppy, Saudi Arabia’s recovery is running behind expectations (a purposeful choice?), and Iraq’s recovery has been the weakest.

• Overall, the recovery in Middle Eastern supply is outpacing our initial expectations and, importantly, Chinese-depressed import demand remains weak; the resulting mini-glut helps explain collapsing flat crude prices and the reemergence of prompt contango across all major crude grades.

The oil market stands at a bizarre interregnum, caught between the rapid rise in exiting oil flows through the tentatively reopened Strait of Hormuz and the ongoing China-driven weakness in Asian import demand. The initial recovery is running faster than expected in terms of both exiting and entering shipping capacity through the Strait of Hormuz, with the current bottleneck now appearing to be upstream of shipping as fresh loadings lag empty tanker availability in the Gulf.

Against this background, there is ongoing confusion regarding the specifics of the “recovery” in the Strait of Hormuz. We are seeing conflicting data reported for both (1) type of flows and (2) volume of flows. First, there are fundamentally different types of flows: Hormuz exiting transits, stranded oil on water in the gulf, fresh loadings, and production proper. Then, there is the ambiguity around the volumes of crude that have, for months, been successfully rerouted around Hormuz to the Red Sea and the Gulf of Oman.

This piece will just look at the flow of supply out of the Middle East from the initial disruption to the current recovery. While pieces of this Hormuz crisis flow equation have been published over the past month, this is an attempt to put it all together in one place. This piece will leave the China-depressed import market side for our next thematic report.

Stop, Drop, Rocket

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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.

🎙️ I had the opportunity to rejoin the Odd Lots podcast (audio) this week to talk about how the world managed to avoid the extraordinarily high demand-destructive pricing that I initially thought would have been made necessary by a months-long closure of Hormuz. While there were many small things that added up, the 10,000 lb. gorilla in the room was China’s unprecedented 5 MMbpd cut to its crude oil imports. We still don’t completely know how—or most importantly why—Beijing managed to pull it off, a topic about which I discussed at even greater length on the Shift Key podcast (audio) earlier this week.

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Summary

Flat Prices continued to spiral lower, ending down ~$8.50/bbl with Brent in the low $70s, on the back of both (1) ongoing paper market selling and, more fundamentally, (2) the temporary mismatch between the surge of exiting Hormuz barrels and an Asian import market still defined by China’s ongoing buyer’s strike.

Timespreads collapsed on the temporary mini-glut, with Brent and Dubai flipping into outright prompt contango and WTI only managing to hold onto very thin backwardation; term structure is a far more reliable indicator of market condition than is flat prices, and it’s currently telling us that we’re oversupplied relative to demand.

Inventories data leaned bearish thanks to one of the largest weekly Singaporean product stock inflows on record as well as a pop in ARA European fuel oil stocks; US headline inventories fell at their lowest rate since early April despite the large ongoing decline in US crude stocks.

Refined Products went from hot to hotter as US gasoline cracks set a fresh all-time seasonal high—though, they’re starting to feel long in the tooth given the recent bottoming of US gasoline stocks and overstretched positioning—and diesel margins jumped $10/bbl on fears of a Russian export ban given the ongoing collapse of the Russian refining sector under Ukrainian drone attack.

Market Positioning data confirmed that speculators went shorter on crude this past week, driven entirely by a capitulation across gross length and gross spec shorts actually also fell; momentum could still certainly pull us lower—there’s some room to go to last year’s all-time low—but the balance of positioning risk is now largely to the upside and expected to fuel the pace of any rally should the status of Hormuz suddenly deteriorate.

As Well As the crude market is currently oversupplied(?!); a Hormuz jailbreak; and we know that Iran can take the Strait but can Iran HOLD the Strait?

What Happened This Week

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Overview

• The global petroleum liquids market remained in steep deficit through April as ongoing shut-ins across the Middle East hit their full-month impact and were only partially offset by contractions in Asian petrochemical feedstock demand. Global onshore stocks—both commercial and strategic—continued to draw aggressively, offset somewhat by the rebound in oil-on-water driven by higher Western exports to Asia.

• Global crude markets have weakened notably over the past couple of weeks, with prompt crude timespreads dipping into contango for the first time since February, as the rising number of tankers exiting Hormuz runs into an Asian market still largely shaped by China’s ongoing buyer’s strike. Meanwhile, refined product markets continue to tighten in a sign that the world is increasingly short of refining capacity, further hampering crude demand.

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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.

For additional complementary oil context, check out my appearances over the past week with the Money and Mine podcast (video), CBC’s Power and Politics (video), The Wall Street Journal (print), The Atlantic (print), NBC News (print), CBC News (print), and Vox (print).

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Summary

Flat Prices fell ~$7/bbl following the announcement and subsequent signing of the US-Iran MOU, driven by an enormous volume of speculative short-selling on the back of optimism that transits through the Strait of Hormuz will rapidly normalize and flip the oil market into renewed surplus.

Timespreads also sank under the weight of that same normalization optimism, with Dubai crude contracts plunging into outright prompt contango and both Brent and WTI on the edge of falling back into contango themselves for the first time since February.

Inventories continued to crater across the US and ARA Europe, only slightly offset by a modest build in Singapore off an extraordinarily low base.

Refined Products markets are seeing increased gasoline tightness as US gasoline crack spreads ripped higher, back to near crisis highs and on the edge of breaking above 2022’s all-time high seasonal refining margins.

Market Positioning data confirmed that speculators saw their largest weekly reduction in net Brent position (CFTC data delayed until Monday) through the Hormuz crisis, with the net position sitting at its lowest level of 2026 and gross short positions experiencing their steepest climb on record to within ~1 million barrels of the all-time high Brent short position recorded in December; covering this gargantuan short position will provide rocket fuel to any future crude rally.

As Well As the Memorandum of Versailles; US concessions; chaotic start to Hormuz reopening and renewed threat to stability of the MOU; reassessing Hormuz oil transit flows; tracking Gulf production restarts; and the implications of the IEA’s latest 2027 glut forecast.

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 (53-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 oil production rose +240 kbpd m/m to 24,866 kbpd in May, accounting for the official departure of the UAE from the producer group; overall output fell an additional -2 MMbpd including the loss of the UAE, effective May 1st.

• Iran’s production is collapsing on the back of the US blockade, down ~28% in May from February 2026 levels, with further declines expected through June.

[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.

For even more context, check out my NYC video appearance with Paul Sankey (video, go Knicks!) as well as my comments to the 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 sank $6/bbl on the back of the most optimistic torrent of MOU-optimistic headlines since April and Brent crude finished at its weakest since the beginning of the Iran War (around $87/bbl); Brent traded as low as $85.80/bbl in earlier Friday trading, also the lowest intraday tick of the Hormuz Crisis and exceeding, even, the steep mid-April selloff.

Timespreads continued to weaken alongside flat prices, with prompt spreads of all major benchmarks slipping tightly from around $2–3/bbl to $1–1.50/bbl; despite plunging inventories, crude term structure remains the strongest counterargument to ongoing, acute supply tightness.

Inventories data leaned bullish given large stateside crude draws and a continued sharp rout in Singapore that furthered last week’s collapse and brought fuel stocks to their lowest level since 2013; these draws were blunted, only somewhat, by a crude-driven build in ARA European stocks.

Refined Products markets saw gasoline crack spreads rise amidst still-precariously low US stocks and diesel margins fade alongside crude on Iran MOU optimism.

Market Positioning data again confirmed broad selling of crude oil futures and options by speculative participants; the net speculative position as a share of total open interest across the six largest crude contracts fell to the lowest level since mid-February, when Brent crude prices were more than $20/bbl lower.

As Well As kinetic-to-diplomatic whiplash; do we actually have an MOU deal?; cash is king; measuring the Hormuz “leak”; and my NYC trip reflections on current sentiment.

What Happened This Week

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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.

I had the opportunity to rejoin Erik Townsend on the MacroVoices podcast for another update on how I’m thinking about the Iran War and the Hormuz oil shock—and why prices aren’t higher! (audio, 46:30-forward). I also joined Agelica Oung on the Taipology podcast to talk about China’s role in the crisis response so far (and lots more on that in this week’s writeup below). I spoke with the Financial Post to talk about the 1.5 billion Middle Eastern barrels we can already count as lost so far in the 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 rose through Wednesday before easing back, ending ~$1/bbl higher as the market remains in a perilous limbo, awaiting any sign of progress in negotiations between Washington and Tehran.

Timespreads restrengthened from last week’s end-of-month swoon as all major crude benchmarks are holding $2-3/bbl in prompt backwardation; that’s substantially weaker backwardation than we saw at the heights of late-March/early-April but still represents extreme tightness.

Inventories data mixed but, again, leaned bullish on the back of a collapse in Singaporean inventories; US total crude inventory draws hit a whopping -18 MMbbl, split equally between commercial and strategic stocks, and the mild bounceback in US gasoline stocks capped the largest (and tied for longest) stretch of consecutive gasoline draws on record.

Refined Products markets remain tight and choppy; both gasoline and diesel crack spreads were roughly flat ($35/bbl and $60/bbl, respectively), though gasoline, in particular, finally caught some breathing room

Market Positioning data confirmed that speculators were once again net sellers of crude futures and options contracts over the past week-through-Tuesday, driven largely by a continued buildup in gross short positions. The leaking of this speculative length is gradually removing a key downside risk for crude prices while at the same time beginning to build up the dry powder that will provide explosive upside to the next rally should inventories continue to drain and fundamentals retighten anew.

As Well As China China China (all I can think about is China), Iran wants its pallets of cash, Trump envoys begin technical nuclear consultations with US national lab, and yet another new UAE pipeline plan.

What Happened This Week

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Like last time, we’re posting a recording of the call for oil watchers who weren’t able to make it live.

There’s a ~3:30 minute preview of the call available to all subscribers that covers an update to Hormuz transit traffic, and paid subscribers can watch the full ~75-minute Context Call recording above.

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Our latest contribution to the Dispatch Energy newsletter, A Beginner’s Guide to Reopening the Strait, is reprinted in full below. You can also listen to the story via the recorded voiceover.

Welcome to Dispatch Energy! For weeks, diplomatic efforts to extend the ceasefire in Iran and reopen the Strait of Hormuz have floundered, with the Islamic Republic threatening to call off talks altogether in response to the latest round of fighting between Israel and its Lebanese proxy, Hezbollah. Even if Washington and Tehran do reach another memorandum of understanding (MOU) to halt the conflict soon, fully restoring energy shipments through the strait could take months or more.

Regardless of whether the reopening of the strait begins next week, next month, or next year, it is valuable to think through the arduous process of unwinding the Iran war shock. Let’s dig in.

It’s worth noting at the outset that the first ships out of the Strait of Hormuz will carry what is now effectively a stockpile, not fresh flows. Fewer than half of the 2,000 captive ships are the large merchant vessels like tankers, bulk carriers, or container ships. Only about 200 of those are tankers, down from a peak of around 250 that were initially stranded, according to tanker-tracking data from market data provider Kpler. Those roughly 200 tankers are holding an estimated 160 million barrels of (stockpiled) oil. These barrels—when successfully floated out of the strait—are frequently mistaken for “offsets” to the supply crisis. But it’s important to think about them, instead, as a stockpile: barrels that have been produced but not supplied to the market.

The initial surge of Hormuz exits will simply move one “stock” of oil from the Gulf to the broader market. While this, no doubt, provides some immediate supply relief, it is more equivalent to a release from one of the numerous strategic petroleum reserves in terms of the overall oil stock and flow. Meanwhile, the core flow crisis remains because 13 to 15 million barrels per day of Middle Eastern oil production capacity has been forcibly shut-in by the closure of the strait, and this production will not restart until there is sufficient export capacity.

We must also consider timeline and volume. Iran has pledged to facilitate a return to prewar shipping levels within 30 days of the MOU’s signing. Depending on the source (e.g., S&P Global, Lloyd’s List), this refers to the roughly 150 large merchant ships that transited the strait each day prior to the war’s opening salvoes on February 28. But this figure includes not just tankers but also bulk carriers carrying goods such as metals, food, and fertilizer. Ultimately, the pace at which stranded vessels will clear the Gulf hinges entirely on the volume that Tehran allows to cross the strait each day. And that volume will hinge entirely on whatever MOU is ultimately signed by both parties.

Complicating matters further is that current shipping levels are unconfirmed, which could make monitoring MOU compliance on this condition difficult. Iran has been reporting oddly high transit levels via state and social media, claiming earlier this month that 30 to 40 ships were crossing the strait each day. But tanker tracking tells a completely different story: Fewer than 10 daily transits and on some days only two. The easiest explanation for the discrepancy is that the IRGC is counting smaller vessels, which ultimately don’t move the needle on commercial disruptions. This may be an effort to show “responsible management” of the strait, but I fear these inflated numbers could be used to claim compliance in reopening the strait in the event of a deal.

And it’s not just Iran that is being vague about vessel counts. The U.S. has claimed that it has “guided” 70 ships across the strait over the past three weeks, largely with their automatic identification system transponders deactivated. This is a plausible figure but, again, that’s only three to four ships per day across a waterway that regularly saw 130 to 150 daily transits prewar. More substantively, it remains unclear what this “guidance” actually amounted to and, more importantly, these “dark transits” have been entirely unverified to date.

Regardless, caution will be required in the early days of reopening. While there has not yet been any confirmation of a tanker detonating any of the sea mines that Iran continues to lay in the waterway, the first stage of any reopening effort would be weeks of escorted and closely surveyed transits to establish initial safe channels for entry and egress. Minesweeping is arduous and time-consuming work; a Pentagon briefing to Congress estimated that it would take up to six months to fully clear the strait of mines. And demining will not begin until the war has verifiably ended and ships can operate without the threat of Iranian missile and drone attacks.

Rebuilding routes.

Once the strait begins to empty, the next step is for tankers to (re)enter the waterway. The only way to begin restoring the enormous volume of oil and natural gas liquids (e.g., propane) production currently shut in across the Middle East is to restore export capacity. New, unladen tankers need to pick up currently stranded crude and enable companies to begin restarting shut-in wells.

Unfortunately, it will take weeks, if not months, to resume a prewar flow of inbound Gulf traffic. First and foremost, outbound ships that have been trapped for months will have a strong incentive to rush the exit, while inbound ships will be, very reasonably, apprehensive to reenter the waterway. This will be especially acute in the first days as the durability of any ceasefire agreement is tested. But even after that, the ever-present prospect of resumed hostilities will remain as the two parties try to find agreement on the always-thorny nuclear file.

There are also purely logistical concerns. Outbound ships will spend weeks or months delivering their cargoes before returning to the region to refill. These vessels will also likely require new crews in many cases and may be even further delayed by maintenance after months of irregular use. The stranded ships have reportedly accumulated thick barnacle infestations, which reduce speed and fuel efficiency and even threaten to completely immobilize the propellers or steering systems. Barnacles are always an issue for ships, but the acute infestation was worsened by sitting idle for months in extremely warm water. Some of this work will be required before the ships can safely exit the Gulf, and further, non-emergency work will be needed before they can return to normal service.

Meanwhile, potentially inbound ships have been diverted en masse. Many of the ships that had been servicing the Middle East-to-Asia route have diverted to facilitate the growing flood of exports from the U.S. Gulf Coast, which has put many of them on the wrong side of the planet were Hormuz to reopen tomorrow. Getting them back from the four winds will take weeks, and that’s after owners and insurers have decided it’s safe to return.

Resuming production.

Restoring upstream production is the only true offset to the gaping hole in the global supply balance. Over the past three months, 12 to 14 percent of global oil production has been lost, and the accumulated sum of unproduced Middle Eastern oil already exceeds 1 billion barrels relative to what we expected the region to produce this year. If this reopening began next week, unproduced oil would likely settle at around 1.5 billion barrels given that the restart process will take time.

And no one knows how long that restart process will take. This is a truly unprecedented event in both the brisk pace of shutdowns and the enormous scale of the reopening. In the best-case scenario, it will take weeks to months to get these wells flowing again. Ultimately, the exact timeline will vary by country and, more specifically, the depth of cuts. Saudi Arabia has been able to divert some of its oil exports via the East-West Pipeline to the Red Sea, so its production is only down roughly 30 percent. Meanwhile, Iraq and Kuwait have had to cut far closer to the bone; the CEO of the Kuwait Petroleum Corporation said in March that, were the war to end immediately, it would take three to four months to recover prewar levels of production.

Meanwhile, despite the broad expectation that shut-in production can be ramped up to prewar production levels without too much trouble, the extent of damage to upstream facilities remains unknown. Just one example: Iran struck Qatar’s Ras Laffan liquefied natural gas export facility in mid-March, causing what QatarEnergy’s CEO described as a reduced export capacity of 17 percent for up to five years. Even a 5 percent loss of overall prewar volumes would mean a sizable long-term hit of 650,000 barrels per day to global oil supply.

But the greatest threat of durable damage is to downstream facilities, such as refineries and petrochemical facilities. These were Iran’s preferred targets in the early weeks of the war, and most of the Gulf states have closely guarded information pertaining to the type and scale of facility damage. Durable damage to these sites could hamper immediate postwar supplies of scarce jet fuel and diesel even if crude flows are restored.

Looking ahead.

There is no “normal” going forward. The Strait of Hormuz had never been closed before, and this unprecedented event makes it much more likely that it will be closed once again in the coming years. This is a gargantuan shift in risk outlook for the world’s most important source of oil supply.

All of this means that inventories are critical moving forward. First, countries across the world will need to restock their reserves following massive wartime releases. Second, the new reality will be an expansion of postwar inventories, both strategic and commercial. It’s been clear throughout this crisis that countries underinvested in strategic stockpiles, like India, have been particularly vulnerable to the Hormuz shock and are now working to expand their reserves.

Inertia is the greatest hurdle at this stage, with neither Iran nor the U.S. seeming sufficiently compelled to cede ground and come to an agreement. Every week that this crisis drags on puts additional fundamental strain on the oil market: falling stocks, growing scarcity, and rising prices to curtail demand. If President Donald Trump chooses only to make a deal when the market pain becomes acute, then this fundamental strain could continue to accrue for months—even after Washington and Tehran finally ink an agreement.

The oil market has been abnormally patient thus far through the largest supply shock in the industry’s history, but that patience can only hold for so long. Commercial inventories and other buffer stocks are drawing down at the fastest rate on record and prices will eventually need to ratchet higher to ration constrained supplies.

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.

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 advanced +239 kbpd m/m to 31,141 kbpd in March (+924 kbpd y/y) driven almost entirely by the US; Canadian growth took a temporary breather while Mexico improved from a heavy drag on continental output to a modest boost.

• Continental petroleum product demand fell -803 kbpd m/m to 25,019 kbpd in March (+555 kbpd y/y), with the US propelling the bulk of that growth thanks to heavy increases in NGL demand. US refinery output also saw a stark shift in yields away from gasoline toward globally scarce jet fuel amidst exploding margins, helping stave off jet fuel shortages at the cost of tighter gasoline markets.

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

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