The Officials

The drums of war are rolling across the Middle East again. Israel bombed Iran. The signs were there to see, from the pull out of American personnel from the embassy in Iraq to persistent buying of high strike call options and rising flat price ahead of the actual strikes. But some of us felt reason would prevail – big error in thinking – that nothing of significance would happen on the TACO Thursday night Washington/Friday the 13th in other areas of the world. Iran is a big place and it would take a massive effort to move the needle, so we felt the action would not happen because any pinprick would be futile.

Everyone took a breath! Flat price cooled from its flirtation with $70, descending through the European morning towards $68.50 by lunchtime. Team America didn’t want to miss out on the bullish fun, though and the afternoon saw it back up above $69 and having another punt at $70! The structure had a relatively muted response to yesterday evening’s assault on the 70 handle but post-close it skyrocketed to near $1! The strongest we’ve seen since April, excluding expiry wackiness at the May roll. Having flirted with contango for a while, the Dec/Jan spread is now at a robust 20c!

The market’s twitchy! There are lots of itchy small fingers hovering ominously over big red buttons. But it is Taco Thursday, so don’t worry! The buy button was in hot demand as Brent surged – and $70 was so close it could almost taste it! It peaked at $69.92/bbl but failed to get a hold on the elusive handle – it would have been the first time since 3 April, just after Trump barged into the world economy with a huge machete on ‘Liberation Day’. While Brent failed to breach $70, GME reported Oman futures trading at $70.20 early in Singapore! Crude oil outside of the Strait of Hormuz is particularly tasty in the event of an almighty mess. Imagine the impact of gasoline for the summer driving season in the US. But we really hope cooler heads prevail and respect the sovereignty of countries, while doing what is best at home!

The dip didn’t last long. Trump’s pessimism on Iran and optimism on China had Brent bounding up to the $68 level again, breaking above there for the first time since 23 April! 55% tariffs on Chinese imports into the US and 10% tariffs on China’s imports of US goods. Americans should feel so grateful that now they get to pay 55% more for the Chinese products they import while the Chinese people equally should feel grateful they only pay ten percent more for what they import from America! Let me ask y’all who got the better deal when you buy your next TV? While Brent reacted, other markets quietly sat on their hands, digesting the announcement: equities ebbed and flowed and the DXY only wilted marginally. The first of many? Lutnick assured us of “deal after deal” next week – but he’s not one to under-promise, having said the same many times before… Lunatic times!

It’s more important than ever to be fluent in reading tea leaves and consulting the stars or coffee grounds to understand where the market’s going. With so much up in the air at the minute, the market is unsure which way to go: trading off scraps of clues coming out of the US-China trade talks is tricky game, while Iran and the US contradict themselves in their public and private statements. A “framework” for US-China trade is a good start, but it’s nothing for the market to work with. In whatever analysis, you or we are making, take into consideration TACO as well as a growing reluctance for any self-respecting country to just give
in. This means that the global growth rate will be lower than expected with energy crimped slightly. A trading source expected the adjusted growth rate pre import/exports accounting to go negative, job losses to mount and industrial activity to decline.

The window’s been chaotic of late and today continued to be busy, though somewhat more orderly. BP led the charge on the sellside, lowering offers for both Midland and CIF Forties. It was the Midland that attracted buying interest, as Totsa swept in to lift the offer for 22-26 June at Dated +$1.25, while PetroIneos picked up Vitol’s offer at $1.95 over Dated for 3-7 July – that’s a steep curve!

In the week ending 6 June 2025, exchange traded futures volumes in Brent, Gasoil, Heating Oil, RBOB and WTI increased across the board w/w. With all instruments seeing steep rises in volumes, especially in September and October, with most
notable ones, Heating Oil (over 81% and 96% respectively). For Brent, it was the September contract volumes that had the largest increase (over 39%), whereas in WTI, the August futures soared the most (over 60%).

It’s allocation day! And no huge surprises in the July allocations; the Saudis held pretty steady from their June provision to send 47 mil bbl to Chinese refiners in July. Within that, there was some chopping and changing as Unipec and PetroChina got slightly larger allotments, while Rongsheng lost 1 mil bbl – but the ‘teapot’ (bigger than most global refineries) by far the largest share! Allocations for May hit a record since the start of The Officials at 48 mil bbl – the highest since July 2024 allocations – while the June and July allocations occupy second and third spots, respectively.

Flat price keeps going! $67 was a tempting target as Brent climbed this morning, stretching out its fingers to reach that elusive level. It brushed $67 at 13:45 BST and another during the window, but failed to gain a toehold and came to the European close at $66.92/bbl. We’ve been bullish for a few weeks now and the market’s finally waking up to the fact OPEC quota hikes don’t equate to supply increases.

Some OSPs bring joy, others bring pain. Joy for consumers ready to gobble up cheap crude, against pain of producers squeezed by low prices. The Murban/Dubai debacle had ADNOC up in arms, frustrated its ‘most valuable’ grade was setting the benchmark, pricing below the heavier, sourer Upper Zakum. For July, Murban is set at $63.62/bbl, down over 4 bucks from June pricing, with Upper Zakum set at a 10c premium, Das at Murban -55c and Umm Lulu at Murban +15c. The 10c UZ/Murban inversion is minor stuff compared to the downward flat price correction. This is real money! Imagine you produce 4 mil b/d and export 3 mil b/d, (this is just illustrative) but this would mean $12 million less revenue per day or $360 mil less per month. We’ll be talking billions if the market doesn’t recover and persistent overproduction continues. You cannot overproduce and have no price impact. In other words: you can’t have your cake and eat it!

On the 81st anniversary of D-Day, the North Sea was sombrely quiet and there was not a great battle among the traders. But the longs were definitely winning in the flat price front. Brent hit triple six for a while, $66.6+ something. The window players look fatigued after a busy week; Totsa and Mercuria were back, bidding for Midland yet again, bringing bids of +$1.45 and +$1.65 over dated. The sellside was also populated by the usual suspects, as BP and Phillips offered again, bringing +$2.00 and +$2.10 over dated to the table. But neither side wanted to budge much further, and no one traded.

Rome is burning! Brutus, Cassius, Judas… they’re all out for revenge. The knives are out and everything’s fair game! Reality TV soap operas can’t come close to this level of drama. We wouldn’t blame the US’ global rivals for warming their feet by the fire with a massive bucket of popcorn watching this one go down. The political schism is of monumental scale and could rip the American political scene asunder! As chaos engulfs the US political scene, oil remains largely unchanged, with August Brent still firmly anchored to $65, on a steady downtrend through today’s Asian session.

Trump’s phones are busier than a teenager’s as he calls his bros one after the other. Or are they rivals, despair not, a deal is in work or not. He first called Putin about the Russia/Ukraine war and today Xi to talk about the US-China trade war. Bessent said trade talks had stalled and stagnated and suggested the two biggest wigs should talk directly to iron things out. The call gave the market some good vibes and Brent flat price jumped to near $65.80 in the aftermath – it wasn’t just oil, either, as equity futures jumped on the news (though quickly sold off) and gold dropped some of its gains made in early trading.

Brent was on a sideways run though today’s Asian session, before climbing again to above $65, though it slipped to the close at $64.93/bbl. The futures structure is creaking under the pressure of headline extra supply and lukewarm demand prospects. The reality is far more complex but few understand that any headline about OPEC supply increase is fake. We mentioned yesterday that the Dec/Jan spread had returned to backwardation but it keeps flitting back and forth with contango, while the front spread is being ground down towards 60c, having started the month near 80c.

The Saudis know how to build the tension! They had us waiting a while into the afternoon for the July OSPs. A 20c cut on the month for Arab Light to Asia – the same for Extra Light, while Medium got a 10c cut and Heavy held steady from the June OSPs. Hey, Arab Heavy is the good stuff they need for the summer burn, so no need to discount it! The cuts to Asian OSPs were slightly less than the month on month change on the Dubai backwardation structure implied, and perhaps the Saudis also considered the shenanigans in the Dubai market and the impact from the weak Murban during May trading. The Saudis also took some of the cash that they so generously gave in previous months; we noticed they had frequently set OSPs slightly below where structures had implied in recent months.