Not fully priced
Market unduly shrugs off Red Sea risks
In this report: Why front prices are collapsing back and how diesel is about to get tight!
Last week. Brent +11.83% (+$10.44) Open $89.30 High $102 Low $86.12 Close $98.70
Texas oil fields have been like a reliable old warrior that could rise to the task when needed. That old warrior can't rise anymore-Byron Tunnell on the lack of spare capacity of US drillers in the post Suez crisis world. Today, US drillers are in the same situation.
Top U.S. military commander in Middle East advised halting Hormuz bombing
Every Oil Crisis in Modern History: What Caused Them, What They Cost, and How Governments Responded
The Suez Canal Crisis of 1956 & The Rise of the US
OPEC+ likely to again raise oil output targets from September, sources say
Big Tech Debt Flood Is Taking Over Risk In Market: Credit Weekly
Is Europe’s gas market inching towards a winter crisis?
US Goes All-In on Diesel Production Amid Growing Global Shortage
The U.S. oil reserve is at a 40-year low — but the government says there’s still plenty of breathing room
China oil market braces for possible August fuel export halt
Strategic Petroleum Reserve - US Department of Energy
1230 BST Monday 27th July 2026- Source: Newsquawk
View
History is playing out right in front of our eyes. The designs of empire are being battle tested across two of the world’s 7 key oil choke points.
The US administration is at war with Iran at the behest of Israeli desires for a greater Israel plan. American lives and taxpayer money are grist for this geostrategic mill.
Trump is now as they say, in too deep. The outcomes from here are becoming increasingly binary. With dwindling military options bar a nuclear strike in Tehran, The US faces pulling out of the Middle East completely. The far reach of Empire is failing, regardless of all attempts to win the war through narrative control. According to Rubio and Vance, this war was over 3 months ago and Iran have zero military capabilities. What complete horseshit! Stating at almost every hot point ‘Iran are desperate to make a deal’ - more bollox. To steal a line from the great Logan Roy (Succession), They are ‘Not serious people’. You can not run around the globe playing Alexander the great, like the world is all for the taking. The mistake here is that it is not.
America is clearly a vassal state to Israel, and there are 1.5trillion dollars to prove it.
So what’s the trade? Well, I have never seen a more bullish picture for crude oil and energy in my life.
Closure of The Straits Of Hormuz & Bab El Mandeb strait
20% IEA OECD coordinated release of 400mb (20% of global stores) coming to an end.
We are approaching Autumn, where refiners will only have 1 major buying program phase left in the year - seasonally observed.
Russia refining is out about 40-50% and more may fall. Globally, 10% of refining is closed.
Demand is tapering in China, but we have not reached traditionally high enough prices to start real demand destruction across the western world - Europe, Americas.
The SPR release has successfully sheltered consumer markets from real price impact exposure……. so far. That is about to close in the next 4 weeks. Refiners margins will compress.
This is all known and pricing in right now. Despite the bullishness, I would not chase these highs on Front month futures-read more in the trade section below.
In the last report, I wanted to bring awareness to the refinery situation that is unfolding. Effectively global refining capacity is tight, then we had a massive pullback on price that directly correlated to giving refiners cheaper oil with gang buster demand. Higher prices now, will serve to contain that spread back into its historical range.
The way I see it, it’s like the market has been living off of its SPR savings for the last 6 months. Those savings have taken a serious hit- about 20 to 30%. There are still ample amounts left in the tanks.
The falsifiable test of this is that Iran come back to the negotiations table and call off Ansar Allah (The Houthis). Once we have this confirmed by Iranian negotiation leaders/ political leaders, the bulls have to shift - we will see oil prices crash back down. But until then, we are on the opposite side. Trump is turning up the heat and so is Iran/Ansar Allah.
Diesel - don’t panic!
There is a real risk to diesel prices at the pump rising again drastically. The crack has gone vertical and it is going to come back down if we hold the $80+ handles on WTI. Do not read that as the problem going away though. Here is what actually happened. When we slid down on price in the MOU phase, refiners were buying crude cheap and still selling product at the pump for the same money as before. That is a golden run, and their margins showed it. Now crude has come back up and the run is over. Think oil up, margins down, oil down, margins up - easy.
The thing to watch is what is floating. Crude on water is at a record high.
-Continue reading for product dynamics, The SPR flow problems, The Net Net, COT positioning on oil and Trade Section.
