Analys
Rebounding on expectations for a tightening Q3-17 while US shale oil rigs continues to rise

Brent crude front month contract lost 3.9% last week closing the week at $45.54/b. Even the longer dated December 2020 contract lost 1.7% with a close of $51.86/b. WTI crude prices lost a comparable amount with the WTI 1 mth contract closing at $43.01/b.
Oil prices staged a 1.6% rebound during the last two days of the week following a more or less continuous sell-off since late May. There were no obvious bull-drivers lifting prices higher. Technical indicators however pointed to solid oversold territory. Headlines started to air views that “when all headlines are bearish, that’s the time to buy” etc.
Crude oil prices are gaining another 1% this morning with Brent 1mth contract trading at $46.0/b. Again there is no obvious bull-driving headline. The price recovery of 2.7% since the bottom last week cannot really be said to be explosive and there is currently no headline bullish driver pushing it higher.
We do have a strong, seasonal increase in oil demand ahead of us for Q3 and Q4 with a substantial amount of refineries heading back into operation. Thus the current weakness in the physical crude oil market could be the final bear-point before a tightening crude oil market and significant inventory draw downs in Q3 and Q4. We do believe that inventories will draw down significantly during the coming two quarters. The price effect could however be a firming of the 1 to 18 mth contract where the 1 mth contract gains versus the 18 mth contract rather than a lifting of the whole forward crude price curve.
The strong rise in floating storage was also suddenly look upon as a sign that physical crude traders are taking long position in physical cargoes awaiting better prices. The reason being that it is not economical to store oil at sea since the contango isn’t really deep enough. Thus the only explanation would thus be that physical traders are proactively taking on floating cargoes in order to position for an oil price rebound. We are however not all that convinced about this argument. The 2 mn bl Sea Lynx VLCC has now been circling in the North Sea for several weeks with oil from the vessel being offered repeatedly to the market. The same goes for the 2 mn bl Desimi with has been circling in the North Sea since late April, early May.
The production revival in Libya and Nigeria is creating concerns for the effect of OPEC’s cuts. Exports from Nigeria now look set to reach 2 mn bl in August while Libya’s NOC last week stated that they reached 0.9 mb/d with a target of 1 mb/d in July. This adds up to 3 mb/d for the two versus a production of 2.2 mb/d in November when OPEC & Co agreed on its production cut.
Last week 11 oil rigs were added in the US. Implied shale oil rigs rose by 13 which is the highest weekly addition since mid-April. Looking 6 weeks back the WTI 18 mth price contract traded at $49-50/b which obviously was not low enough to deter drillers from adding more oil rigs. On average there has been added 6.7 shale oil rigs each week the last 6 weeks. The average weekly additions since June last year are 6.8 rigs/week. The high of rig additions was from mid-Jan to mid-March when 11.6 rigs/week were added. Thus seen from the US shale oil drilling side of things the oil price has not yet become low enough for long enough in order to stem a further rise in active shale oil rigs.
Table1: 11 additional oil rigs last week in the US
Ch1: Changes in US shale oil rig count versus WTI 18 mth contract price some 6 weeks ago.
Ch2: The 1-6 mth contango has not deepened
This part of the curve should tighten in Q3 and Q4
Ch3: Hedgefund speculative positioning – Net-long close to previous lows
Ch4: Total net long speculative WTI positioning – Into neutral territory but still some way to go to previous lows
Ch5: Production revival in Libya and Nigeria partially countering the effect of OPEC cuts
Kind regards
Bjarne Schieldrop
Chief analyst, Commodities
SEB Markets
Merchant Banking
Analys
Tightening fundamentals – bullish inventories from DOE

The latest weekly report from the US DOE showed a substantial drawdown across key petroleum categories, adding more upside potential to the fundamental picture.

Commercial crude inventories (excl. SPR) fell by 5.8 million barrels, bringing total inventories down to 415.1 million barrels. Now sitting 11% below the five-year seasonal norm and placed in the lowest 2015-2022 range (see picture below).
Product inventories also tightened further last week. Gasoline inventories declined by 2.1 million barrels, with reductions seen in both finished gasoline and blending components. Current gasoline levels are about 3% below the five-year average for this time of year.
Among products, the most notable move came in diesel, where inventories dropped by almost 4.1 million barrels, deepening the deficit to around 20% below seasonal norms – continuing to underscore the persistent supply tightness in diesel markets.
The only area of inventory growth was in propane/propylene, which posted a significant 5.1-million-barrel build and now stands 9% above the five-year average.
Total commercial petroleum inventories (crude plus refined products) declined by 4.2 million barrels on the week, reinforcing the overall tightening of US crude and products.


Analys
Bombs to ”ceasefire” in hours – Brent below $70

A classic case of “buy the rumor, sell the news” played out in oil markets, as Brent crude has dropped sharply – down nearly USD 10 per barrel since yesterday evening – following Iran’s retaliatory strike on a U.S. air base in Qatar. The immediate reaction was: “That was it?” The strike followed a carefully calibrated, non-escalatory playbook, avoiding direct threats to energy infrastructure or disruption of shipping through the Strait of Hormuz – thus calming worst-case fears.

After Monday morning’s sharp spike to USD 81.4 per barrel, triggered by the U.S. bombing of Iranian nuclear facilities, oil prices drifted sideways in anticipation of a potential Iranian response. That response came with advance warning and caused limited physical damage. Early this morning, both the U.S. President and Iranian state media announced a ceasefire, effectively placing a lid on the immediate conflict risk – at least for now.
As a result, Brent crude has now fallen by a total of USD 12 from Monday’s peak, currently trading around USD 69 per barrel.
Looking beyond geopolitics, the market will now shift its focus to the upcoming OPEC+ meeting in early July. Saudi Arabia’s decision to increase output earlier this year – despite falling prices – has drawn renewed attention considering recent developments. Some suggest this was a response to U.S. pressure to offset potential Iranian supply losses.
However, consensus is that the move was driven more by internal OPEC+ dynamics. After years of curbing production to support prices, Riyadh had grown frustrated with quota-busting by several members (notably Kazakhstan). With Saudi Arabia cutting up to 2 million barrels per day – roughly 2% of global supply – returns were diminishing, and the risk of losing market share was rising. The production increase is widely seen as an effort to reassert leadership and restore discipline within the group.
That said, the FT recently stated that, the Saudis remain wary of past missteps. In 2018, Riyadh ramped up output at Trump’s request ahead of Iran sanctions, only to see prices collapse when the U.S. granted broad waivers – triggering oversupply. Officials have reportedly made it clear they don’t intend to repeat that mistake.
The recent visit by President Trump to Saudi Arabia, which included agreements on AI, defense, and nuclear cooperation, suggests a broader strategic alignment. This has fueled speculation about a quiet “pump-for-politics” deal behind recent production moves.
Looking ahead, oil prices have now retraced the entire rally sparked by the June 13 Israel–Iran escalation. This retreat provides more political and policy space for both the U.S. and Saudi Arabia. Specifically, it makes it easier for Riyadh to scale back its three recent production hikes of 411,000 barrels each, potentially returning to more moderate increases of 137,000 barrels for August and September.
In short: with no major loss of Iranian supply to the market, OPEC+ – led by Saudi Arabia – no longer needs to compensate for a disruption that hasn’t materialized, especially not to please the U.S. at the cost of its own market strategy. As the Saudis themselves have signaled, they are unlikely to repeat previous mistakes.
Conclusion: With Brent now in the high USD 60s, buying oil looks fundamentally justified. The geopolitical premium has deflated, but tensions between Israel and Iran remain unresolved – and the risk of missteps and renewed escalation still lingers. In fact, even this morning, reports have emerged of renewed missile fire despite the declared “truce.” The path forward may be calmer – but it is far from stable.
Analys
A muted price reaction. Market looks relaxed, but it is still on edge waiting for what Iran will do

Brent crossed the 80-line this morning but quickly fell back assigning limited probability for Iran choosing to close the Strait of Hormuz. Brent traded in a range of USD 70.56 – 79.04/b last week as the market fluctuated between ”Iran wants a deal” and ”US is about to attack Iran”. At the end of the week though, Donald Trump managed to convince markets (and probably also Iran) that he would make a decision within two weeks. I.e. no imminent attack. Previously when when he has talked about ”making a decision within two weeks” he has often ended up doing nothing in the end. The oil market relaxed as a result and the week ended at USD 77.01/b which is just USD 6/b above the year to date average of USD 71/b.

Brent jumped to USD 81.4/b this morning, the highest since mid-January, but then quickly fell back to a current price of USD 78.2/b which is only up 1.5% versus the close on Friday. As such the market is pricing a fairly low probability that Iran will actually close the Strait of Hormuz. Probably because it will hurt Iranian oil exports as well as the global oil market.
It was however all smoke and mirrors. Deception. The US attacked Iran on Saturday. The attack involved 125 warplanes, submarines and surface warships and 14 bunker buster bombs were dropped on Iranian nuclear sites including Fordow, Natanz and Isfahan. In response the Iranian Parliament voted in support of closing the Strait of Hormuz where some 17 mb of crude and products is transported to the global market every day plus significant volumes of LNG. This is however merely an advise to the Supreme leader Ayatollah Ali Khamenei and the Supreme National Security Council which sits with the final and actual decision.
No supply of oil is lost yet. It is about the risk of Iran closing the Strait of Hormuz or not. So far not a single drop of oil supply has been lost to the global market. The price at the moment is all about the assessed risk of loss of supply. Will Iran choose to choke of the Strait of Hormuz or not? That is the big question. It would be painful for US consumers, for Donald Trump’s voter base, for the global economy but also for Iran and its population which relies on oil exports and income from selling oil out of that Strait as well. As such it is not a no-brainer choice for Iran to close the Strait for oil exports. And looking at the il price this morning it is clear that the oil market doesn’t assign a very high probability of it happening. It is however probably well within the capability of Iran to close the Strait off with rockets, mines, air-drones and possibly sea-drones. Just look at how Ukraine has been able to control and damage the Russian Black Sea fleet.
What to do about the highly enriched uranium which has gone missing? While the US and Israel can celebrate their destruction of Iranian nuclear facilities they are also scratching their heads over what to do with the lost Iranian nuclear material. Iran had 408 kg of highly enriched uranium (IAEA). Almost weapons grade. Enough for some 10 nuclear warheads. It seems to have been transported out of Fordow before the attack this weekend.
The market is still on edge. USD 80-something/b seems sensible while we wait. The oil market reaction to this weekend’s events is very muted so far. The market is still on edge awaiting what Iran will do. Because Iran will do something. But what and when? An oil price of 80-something seems like a sensible level until something do happen.
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