Oil & Iran War Context Weekly (W11)
Iran War marches into its third week, the price of physical crude is ripping past relatively sanguine paper barrels, refined product markets are tightening even quicker, and there’s no end in sight.
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.
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.