Oil & Iran War Context Weekly (W17)
Crude notched its first weekly gain since mid-March amidst another week of waiting, seven more days with Hormuz closed, and another 91 million Middle East Gulf barrels unproduced.
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.
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).
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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.