The Officials

They’re playing ping pong with the market! But nobody’s laughing. Adnoc is undoing its cut to cargo allocations after a monumental backlash from lifters and the market at large. Some hedges had already been lifted as they had to adapt to receiving 400 kb rather than 500 kb, but now they’ll be getting 500 kb again! This has totally ruined risk management for the affected players and is the worst commercial mistake we’ve ever seen in oil markets! As one source commented, the lifters’ hedges could be 10 bucks higher due to the war craziness of the past week.
The question is now how lifters react: they could refuse to take the full 500 kb amount, having prepared to receive 400 kb they were told to expect. It comes down to who controls the taps pumping the crude into the ship – will they back Adnoc or the lifter…? One trader said “This feels like even more of a spit in the face!” People are not happy – even those not directly affected by the unilateral chopping and changing of allocations. We feel most of all for those who’ve been messed around by this. These wounds are entirely self-inflicted and we ask what kind of market understanding was lacking by those making the decisions…

The Americans are in a good mood again: no more war, their 401(k) balances bulging as the S&P 500 hunts an all-time high! The vibes are good. Just don’t look ahead too far and see the ugly tariffs rearing their head again on 9 July. Oh, and the dollar is getting hammered. Pound Sterling reached $1.3769 in terms of US dollar this afternoon. Everyone is scrambling to get their money out of the US.
Flat price was on the up today as well, for the first time since Israel and Iran cooled their heels. It even peaked just over the $69 mark shortly before the close, though it fell back to $68.92/bbl. Time spread structure has solidified a little with the front spread firming at $1.28/bbl. But we still have a lingering contango from March 26 tenor forwards…

Flat price may have found some firmer ground and steadied in the upper 60s, but the prompt spread is beavering its way up again: by today’s Asian close it had climbed to $1.19, with that strength filtering down the curve. Supply and demand balances
are still showing supply overhangs into Q4 this year, as the Onyx Global Oil Balance projects a 500 kb/d surplus. Once the
summer burn and peak demand season filters out, the longer tem market outlook is a bit shaky, as the global economy continues to struggle with tariff threats and lukewarm growth.

Trump’s on a victory lap at the NATO summit, boasting about how bombing Iran ended the war in an unprecedented chain of events. But now he likes them and he wants Iran to sell oil to China, “They’re going to need money to put that country back into shape. We want to see that happen”, he said. Trump’s rolling out the red Iranian carpet, saying “We’re not taking over the oil” and he won’t stop oil flows to China – he wants to see Iran back on its feet. BFF time. Israel is very mature so surely they aren’t jealous. The Americans, Israelis and even CIA can’t agree! Iran’s now claiming the facilities were gravely damaged – convenient… And the IAEA’s stumbling around in the dark trying to figure out what’s up. They’re playing ‘4D chess,’ said a source.

Square one. It’s a comforting place. You know where you stand. Maybe it’s around a negotiating table again for the US and Iran, following their well-mannered de-escalation earlier this week. Whether or not Trump’s bombing actually destroyed Iran’s nuclear facilities (even the CIA said the damage at Fordow was minimal), he’s certainly quick to claim it as a win, even despite Iran sauntering out of cooperation with the IAEA and being able to continue unfettered oil exports. Credit where credit is due, Trump can rightfully claim that he stopped the shooting between Israel and Iran. Well done! He needed a win as his diplomatic scorecard hasn’t been looking pretty since he came into office. But hey at least he’s got cheap oil again.
According to conversations with market sources, as the under allocation by Adnoc filters through the system, buyers are physically short on the number of barrels received and this causes issues on their refining systems which were counting on the cargoes. And critically the hedges are losing money big time, ‘it is a $12 million loss,’ said a source. Lawsuits are launched through the chain – likely to hit even Adnoc-said equity sources.

Good manners are back! First Trump thanks Iran for the heads up before the theocracy hit the US base in Qatar. Then he doubles up on his graciousness and says openly China can buy Iranian oil! He even said China can “continue purchasing” Iranian oil – recognising the open secret that China’s been buying shedloads of Iran’s supply for years. This will surely open the floodgates to more nations demanding the right to buy cheap Iranian crude – based on market conversations, there’s certainly appetite in India for cheap Iranian oil if sanctions loosen. Mr T also hopes China will buy “plenty” of US crude. But he’s got to remove the tariffs! Even 10% on oil kills competitiveness of American grades, so only a complete removal of tariffs would see that happen.

Amidst mounting tensions in the Middle East and speculation of possible US involvement -ahead of the weekend strikes- in the week ending 20 June 2025, exchange traded futures volumes in Brent, RBOB and WTI declined w/w across the board. For Brent, August contract volumes fell the most (-13.35%), while for WTI it was the September contract that saw the steepest drop (-54.11%). Heating Oil August exchange traded volumes declined w/w, whereas volumes for September and October contracts rose w/w. By contrast, Gasoil exchange traded futures volumes rose across the board w/w, the only instrument to post universal increase.

Back to the 60s! The ceasefire between Israel and Iran double tapped flat price after yesterday evening’s plunge. Having ended yesterday’s trading above $72, it dropped to open today at $69.60. We were talking yesterday about how the spreads also had to weaken from their inflated and bulked up position near $1.50 and we saw evidence of that today, as the prompt spread dropped to below a buck, reaching the Asian close at 92c.
The dust is settling as the market falls and teams are busy assessing the damage. We saw the bombardment of Qatar’s American base and even Iraq also reported drone attacks targeting military sites and bases. And now Israel’s reported missile launches from Iran and ordered its people to get to safe spaces! Iran denied firing missiles. And Israel vowed to retaliate with force. Some things are clear but there is a lot of misinformation about. But the narrative and the direction of the war has shifted, and we are in the de-escalation mode. This war is over, folks!

Talk the market up! Bomb! Rinse! Repeat! It’s a broken record. Even the greatest conductors of all time would be envious of such orchestration. The market saw through the transparency and Iran was quick to reassure its “friendly and brotherly” neighbours it meant no harm… Because there was nobody where they fired! They were nice enough to fire the slow ones that are easy to intercept and Qatar reported no casualties. Everyone’s a winner. What a rinse it was, if you were a long holder you were rinsed, bleached, dried out and are now wondering ‘why didn’t I read The Officials?’ We have been telling you the Strait cannot be closed and the supply is healthy and uninterrupted. Don’t forget Trump wants low prices. A winning combo… if you’re short!

The Americans wanted to play ‘whack-a-mole’ but now they’re busy playing ‘Where’s Wally’, searching for where Iran’s stashed its uranium stockpiles – regardless of how “spectacular” a success Trump claims! He came in to end the wars but has become what he promised to destroy! He went from ‘Big Beautiful Bill’ to ‘Big Bad Bombs’. Talk the market up, bomb, rinse, repeat! After gapping up on open to a 5-month high above $80, the market realised there’s no actual disruption and Brent got depressed through the Asian session, dropping back towards $77. In this kind of operation, you need to be on the same page as your allies, but the US and Israel seemed divided on the regime change question. Trump just wanted to blow something up, while Netanyahu wanted to topple an empire. But now Mr T fancies a go at toppling too, because Iran’s regime can’t “MAKE IRAN GREAT AGAIN”. An Israeli strike on a road to Fordow this morning did “very significant damage”, according to IAEA chief.

The Middle East and Asia are hot in more ways than one. Chaos is also reigning supreme in areas beyond Israel and Iran as Adnoc has cut the nominations to equity holders by 20 pct! Look at the document we received and do not ask who gave it but we would appreciate it if you send us more information.

Everyone has their limit, and it would seem we might have found Trump’s. Trump wants cheap oil prices; that’s priority number one. And it turns out war isn’t very good at facilitating cheap oil.
We saw a similar Trump reaction function in equities, and to a bigger extent, bonds. Trump’s economic agenda had pushed treasury yields higher and higher, and stocks lower and lower, and as much as he hoped for a saving grace in the form of a Fed cut, it’s not gonna happen. So, he had to moderate his sweeping tariff agenda, slowing the treasury fire sale.

Brent flat price saw its highest European close since January at $78.80/bbl. But shortly after the close, Brent collapsed to near $76.50/bbl! ICE shut early for a mini break, but CME and Flux kept ticking too! What a TACO speech can do to oil prices. Trump will decide “within two weeks” whether to join Israel or not… Clearly, he doesn’t have a plan, and the threat of direct intervention by the US is rapidly evaporating.

ADNOC faced a horrible May. Prices collapsed so badly that Murban crashed again below the price of crude oil that was believed to be inferior, even by itself, such as Upper Zakum. Not only Murban underperformed on a relative basis, but the flat price also plunged in IFAD, the exchange generating the daily settlements the National Oil Company uses to set its official selling prices. In early June, after some hand wringing, the NOC set the price for its benchmark and flagship Murban crude oil at $63.62/bbl, down a whopping $4.11/bbl from the previous month when Murban was already looking infirm at $67.73/bbl.

The heat is rising sharply in the Middle East with Israel and Iran in direct military confrontation and the US stirring the pot… On Wednesday, Israel announced it had struck over 40 Iranian missile sites and other military infrastructure, including the Iranian internal security agency’s headquarters. And the U.S. Embassy in Israel has begun preparing evacuation plans for American citizens, according to Ambassador Huckabee. Meanwhile, Trump stated he has daily contact with Netanyahu and encouraged Israel to “keep going”. He also claimed that Iran reached out, offering to come to the White House for negotiations. But, the elaborately named Permanent Mission of the Islamic Republic of Iran to the United Nations publicly denied any intention to send delegates to the US for talks as things stand.