Closing at highest since Aug 2022. Brent crude gained 9.2% yesterday. The trading range was limited to $95.2 – 101.85/b with a close at $100.46/b and higher than the Monday close of $98.96/b. Ydy close was the highest close since August 2022. This morning Brent is up 2% to $102.4/b and is trading at the highest intraday level since Monday when it high an intraday high of $119.5/b.

A military hit at Iran’s Kharg island would be a big, big bang for the oil price. The big, big risk for the weekend is that oil infrastructure could be damaged. For example Iran’s Kharg island which is Iran’s major oil export hub. If damaged we would have a longer lasting loss of supply stretching way beyond Trump’s announced ”two more weeks”. It will make the spot price spike higher and it will lift the curve. Brent crude 2027 swap would jump above $80/b immediately. An attack on Kharg island would naturally lead Iran to strike back at other oil infrastructures in the Gulf. Especially those belonging to countries who harbor US military bases. I.e. countries who essentially are supporting the attack by US and Israel towards Iran. Though if not in spirit, then in practical operational terms. An attack on Kharg island would not just lead to a lasting outage of supply from Iran until it would be repaired. It would immediately endanger other oil infrastructure in the region as well and additional lasting loss of supply.

No one in their right mind would dare to sit short oil over the coming weekend. Oil is thus set to close the week at a very strong note today. 

Prepare for another 400 mb SPR release next week. This week’s announcement of a 400 mb release from Strategic Oil Reserves totally underwhelmed the market with the oil price going higher rather than lower following the announcement. For one it means that the market expects the war and the closure of the Strait of Hormuz to last longer than Trump’s recent announced ”two more weeks”. 400 mb only amounts to 20 days of lost supply to the world through Hormuz and we are already at day 14. So next week when we are getting close to the 20 day mark, we are likely to see another announcement of another 400 mb release of SPR stocks to the market. Preparing for the next 20 days of war. 

Global oil logistics in total disarray. We have previously addressed the issue of the huge logistical web of the global oil market which is now in total disarray. The logistical disruption started to fry the oil market at the end of last week. Helped to spike the oil market on Monday. What we hear from our shipping clients is that the problems with supply of fuels locally in Korea, Singapore, India and Africa are getting worse with physical availability of fuels there drying up. It is getting increasingly difficult to find physical supply of bunker oil with local, physical prices shooting way higher than financial benchmarks. To the point that biofuels have become the cheap option many places. Availability of fuels in the US is still good. Not so surprising as the US is self-sufficient with crude and refineries. 

The disruption in global oil logistics doesn’t seem to improve. Rather the opposite. If you cannot get fuel to run your ships, then how can you distribute fuels to where it is needed.

Buy Brent Dec-2026 calls with strike $150/b!! As the days goes by the oil price is ticking higher while Trump is getting one day closer to US midterm elections. Trump was betting that he could put this war to bead well before November. But that will probably not be up to him to decide. It will be up to Iran to decide when to reopen the Strait of Hormuz. It is very hard to imagine that Iran will let Trump easily off the hock after he has killed its Supreme Leader. This will likely go all the way to November. Buy Brent Dec-2026 calls with strike $150/b!!

Brent closed at highest since 2022 ydy. Will end this Friday at a very strong note! Consumers still dreaming of $60/b oil

Brent crude is trading higher overnight, up roughly USD 4.5/bl from yesterday’s close. That said, prices were at one point up nearly USD 8/bl during the night before easing back this morning. Brent is currently hovering around USD 98/bl.

This week has been extraordinarily volatile. We have seen intraday highs at USD 119.5/bl and intraday lows at USD 81.16/bl: all within roughly 38 hours. Every headline is being parsed for signs of escalation or de-escalation, and price action reflects exactly that.

The latest political headlines do little to calm the market. President Trump told Axios on Wednesday that the war with Iran will end “soon” because there is “practically nothing left to target.” On the surface, that sounds like an attempt to signal that the campaign is nearing its end.

Yet, the rest of the reporting points in the opposite direction. According to the same article, neither US nor Israeli officials have received any internal guidance on when military operations are expected to stop. Israeli Defense Minister Israel Katz said the war will continue “without any time limit” for as long as necessary to achieve its objectives. In parallel, both US and Israeli officials are reportedly preparing for at least two more weeks of strikes inside Iran.

That is a major mismatch. Trump is talking as if the campaign is close to completion, while those involved operationally appear to be preparing for something much more prolonged. For the oil market, that alone is enough to keep prices elevated. Even if the White House wants to calm expectations, the underlying signal is still that this may not be over anytime soon.

The “at least two more weeks of strikes” headline matters when you put the numbers into context. We have already had roughly 11-12 days of conflict. Add another 14 days, and we are suddenly looking at around 25 days in total. Apply that to roughly 20 million bl/d of flows through the Strait of Hormuz, and you are talking about something close to 500 million barrels of disrupted supply to global markets.

That is where the 400-million-barrel SPR release headline needs to be understood properly. Yes, 400 million barrels sounds huge. But the key issue is not the total volume (it is the daily release rate). The maximum sustainable release rate is roughly 2 million barrels per day, meaning a 400-million-barrel release would take around 200 days to fully hit the market.

So even though the headline number looks impressive, the short-term offset is limited. If a major disruption removes 15-18 million bl/d from the market, roughly the scale tied to Hormuz flows, then a 2 million bl/d emergency release barely scratches the surface.

i.e., SPR releases are likely more to signal and calm market psychology than replacing lost supply.

There has also been some confusion around the US reserve-release headlines. The 172 million barrels referenced in some reports are not additional barrels on top of the 400 million already announced, they are part of the same broader release package.

Our base view remains that Trump will want this war to end. Oil prices and the approaching midterm elections will push him in that direction. But the much harder question is what it would take for Iran to “reopen” Hormuz fully and safely afterwards. Compensation for rebuilding damaged infrastructure? Guarantees against renewed attacks? Some broader political or security arrangement? That remains completely unclear.

Another important point is that two more weeks of strikes also mean two more weeks of risk for lasting damage to oil infrastructure. Even if the conflict eventually de-escalates, the market may still have to deal with damaged loading facilities, terminals, pipelines or shipping routes. That is part of what makes this more serious than a simple headline-driven spike.

At the same time, some of the “lost” supply may in practice be delayed rather than permanently destroyed. Oil has been built up inside the Gulf during the disruption, and some of those barrels would start flowing back to global markets once the Gulf reopens. So, part of the current shock could later reverse as trapped supply is released.

Overnight headlines underline just how nervous the market remains. Trump said he wants to refill the SPR quickly, Oman reportedly began evacuating ships from Mina al Fahal, and Brent briefly moved back above USD 100/bl as disruption hit a key Omani port. In addition, China has reportedly told refiners to suspend all refined fuel export cargoes: another sign that governments are shifting into supply-security mode.

Another thing often overlooked in these situations is hoarding behavior. If governments or market participants start stockpiling aggressively, the effect can make the situation worse. That is exactly what happened during the 1970s oil crisis, when precautionary buying added roughly 2-3 million bl/d of extra demand on top of the underlying supply shock. That kind of behavior can amplify price spikes very quickly. China has already been building inventories over the past year, and there are signs that other large importers such as Japan and South Korea are also securing as many barrels as they can.

Finally, on naval escorts: we have highlighted before that even if they are introduced, flows would still likely remain well below normal. Lloyd’s estimates that naval escorts could in theory protect enough ships to keep some traffic moving, but that this would require more naval assets than are currently available. Even in that best-case scenario, less than 10% of normal traffic may get through, and realistically, even that may prove optimistic.

In short, inventory releases may help at the margin, but they are nowhere near large enough to offset a major physical disruption. The real issue is not the headline volume of reserves; it is whether physical flows through Hormuz can resume in a credible and sustained way.

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Yesterday’s US DOE report was somewhat mixed, but with the key point being that commercial crude inventories rose by 3.8 m bl on the week to 443.1 m bl. Even after the build, crude inventories still sit around 2% below the five-year average for this time of year.

On the products side, the picture was more constructive. Gasoline inventories fell 3.7 m bl, while distillates declined 1.3 m bl. Gasoline stocks remain about 5% above the five-year average, but distillates are now roughly 2% below. Total commercial petroleum inventories fell by 2.0 m bl on the week, which softens the bearish read from the crude build alone.

Refinery activity picked up further, with crude runs increasing by 328 k bl/d to 16.2 m bl/d, while utilisation rose to 90.8%. Product output also moved higher, with gasoline production at 9.9 m bl/d and distillate production at 4.9 m bl/d.

On the demand side, the four-week averages remain reasonably supportive. Total products supplied are running 1.9% above the same period last year, with gasoline up 0.8%, distillates up 0.4%, and jet fuel showing the strongest growth at +7.3% YoY.

i.e., the crude build is the headline, but the broader inventory picture is less bearish than that suggests. Product draws continue, total commercial inventories fell, and crude stocks remain slightly below normal for the time of year.

IEA Proposes Largest Ever Oil Release From Strategic Reserves (WSJ). Brent up 3.3%. Doesn’t look like the oil market thinks that ”largest ever” release of strategic reserves will help much against current crisis. Brent up 4% to $91.3/b. 

Buy Brent 2027 at close to ”neutral price”. Brent crude for year 2027 is trading at $71.6/b. That is just $3.6/b above the ”neutral price” of $68/b. When the global oil market fluctuates between surplus and deficit, the Brent spot price will swing below or above this ”neutral price” of $68/b. Sometimes way below as in spring of 2020 and sometimes way above.

Brent spot is trading $22/b above the ”neutral price” of $68/b. The Brent 1M price is trading at $90/b this morning and $22/b above the ”neutral price” in an expression of risk, stress and disruption of oil logistics as the Persian Gulf is closed. But the market is pricing Brent Y2027 at $71.6/b and a premium of only $3.6/b above the neutral price. Implicitly assuming that the oil market will be normal in 2027 with normal inventories and normal supply. Everything restored.

If global stocks draws down 500 mb, then $80/b 2027 is the price. More if oil infrastructure damaged. Brent averaged $81/b in 2023/24. Then global visible stocks rose 500 mb in 2025. Mostly east of Suez. Brent then averaged $63/b in 4Q25. If the Strait of Hormuz is closed for 25 days, then global stocks will draw down by 500 mb. Brent should then trade around $80/b just due to the inventory drawdown. Higher if inventories are drawn down more and yet higher if installations of oil production, processing, refining or shipping logistics are damaged. Takes significant time to repair and restore.

When the market now prices Brent 2027 at only $71.2/b it thus assumes that inventories will only draw down by some 250 mb. Ops, we are already there as the Strait of Hormuz now has been closed for 11-12 days. It also assumes that there will be absolutely no lasting damage to oil infrastructure in the Persian Gulf.

Risk that Israel will damage Iranian oil infrastructure. It is increasingly argued that Israel and the US have different strategic goals. The US/Trump wants to end this as quickly as possible. Wants to see oil prices fall quickly back to normal. Israel however probably wants to use this once in a lifetime opportunity to totally destroy and degrade Iran altogether. High or ultrahigh oil price not so important. Leaving Iran with no water, no oil, no money, no economy and very limited capability to rebuild its country (and weapons systems and nuclear facilities) after the war.

Brent 2027 is just one Israeli bomb away from jumping to $80/b or higher. Brent crude calendar 2027 today trading at $71.6/b is just one Israeli bomb (hitting Iranian oil infrastructure) away from trading at $80/b or higher. Global inventories have already suffered 11-12 days of Hormuz closure. I.e. the world has lost 220 – 240 mb of oil stocks. And as stated above, the price of $71.6/b is only $3.6/b above the ”everything is normal price”. What a bargain. Buy it!

Fear is starting to rush through the veins Birol. Looking back at recent events. Fathi Birol (IEA) last week: ”Plenty of oil in the market. No need to release strategic reserves.” Then G7 preparing for release. And now ”IEA Proposes Largest Ever Oil Release From Strategic Reserves (WSJ)”. This shows how the sense of fear is starting to rush through the veins Birol.

Oil price spike forced Trump to the podium. Another is on Monday. Brent spiked to $119.5/b. That forced Trump to jump to the podium reading a statement (quite rare that he reads a pre-written note) of how great everything is going. That all will soon be over. Any issues with the oil market and oil prices will be solved. Trump has the oil markets back. Market believed him and Brent fell sharply. This shows the power of oil. It makes even the most powerful person in the world jump to the podium in an effort to try to talk away the physical problems of the world. It shows that Trump is not in control. Iran declared right after the speech that it is not up to Trump to decide when the war is over. Iran will decide when it is over. Trump might declare victory, pack up and go home. That will however not give any guarantees for the opening of the Strait of Hormuz. That is up to Iran.

Iran has the upper hand. They control the Strait of Hormuz. They control the oil. Trump, Birol and the rest are basically talking about it.

No signs that the world is able to open the Strait of Hormuz by force as promised. We have seen reassurances over the past week that insurance schemes will be set up to cover the war risks so that ships can go through. And that warships will provide safe passage in convoys. Nothing of that so far. It doesn’t take very expensive weapons (Iran has loads of Shahed drones) to shoot at the VLCCs going through. A drone now and then will keep flow of oil through the Strait of Hormuz muted if not fully closed.  

Oil for all or oil for no one. “Strait of Hormuz will either be a Strait of peace and prosperity for all,” Ali Larijani, Iran’s top national security official, said in a social media post on Tuesday. “Or it will be a Strait of defeat and suffering for warmongers.”

Brent Y2027 and beyond is such a bargain!