Oil & Iran War Context Weekly (W22)
Crude prices crater on further—though, as always, unrealized—US-Iran deal optimism and close out largest monthly decline since 2020; more diplomacy needed before physical Hormuz unwinding can begin.
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.
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On the latest episode of the Oil Ground Up podcast, I was joined by Bob McNally, founder and president of Rapidan Energy Group, former White House energy advisor to President George W Bush, and the author of Crude Volatility: The History and The Future of Boom-Bust Oil Prices. Our conversation focused on the history of the market’s view of the Hormuz risk, the latest status of negotiations between Washington and Tehran, and the longer-term consequences to the geopolitics oil the oil market.
For more FREE oil context, check out my appearances on CNBC Asia (video), TVO’s The Rundown (video), BNN Bloomberg (video), MTSLive (video, 4:08-4:33) as well as in the Atlantic (print).
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Summary
Flat Prices fell roughly $11.50/bbl this week to end at ~$92/bbl Brent as optimism about a deal to reopen the Strait of Hormuz reached its highest level since mid-April; May 2026 now marks the steepest monthly crude price decline since March 2020.
Timespreads sank further, with all major crude benchmarks shedding roughly half of the prompt backwardation with which each started the week; prompt Brent saw spreads sink even further on the final day trading for July Brent.
Inventories data leaned bullish, once again, given declines across all major tracked hubs; US stockpiles saw another massive drawdown and, while half of that was SPR crude, the balance of drawing pressure pulled both commercial gasoline and diesel stocks further below trailing seasonal lows.
Refined Products markets remain tight and crack spreads elevated: US gasoline and diesel crack spreads are holding at roughly double and triple the seasonal averages, respectively, underpinned by plunging US inventories despite sky-high refinery run rates amidst surging export demand.
Market Positioning data revealed the heaviest week of speculative selling since the start of the Iran War in February, explaining about half the w/w price decline through Tuesday and very likely continuing through the end of the week given the sustained downside price pressure; this selling pressure, while obviously price negative, is eroding what had become a clear downside price risk in overextended and stagnant speculative length.
As Well As Do we have a deal?; Trump’s view on the negotiations and Iran’s substantive rebuttal; and Trump delays his “final determination” one more time.