Conflict Cracks
Recorded Thursday, July 16, as U.S. forces entered a sixth consecutive night of strikes across Iran, Alex and Mohit cover a market that has retraced much of its recent move and partly repriced the conflict premium.
On crude, speculative positioning made a fast round trip — from heavily short before the conflict, to near the top of its recent long range, and back to short — alongside a forward curve that swung into contango and back. With vessel attacks and U.S. strikes resuming, early short covering is now appearing. The geopolitical picture has escalated across several fronts: the blockade is back in effect, OFAC sanctions have been reinstated, and Houthi activity is one to watch, with the Red Sea, the Bab al-Mandeb Strait, and Saudi Arabia's East-West pipeline as the next chokepoints in question.
Refined products have been the standout. Russia's diesel export ban, a response to Ukrainian attacks on refining infrastructure, runs through at least the end of July and may be extended. The result: diesel crack spreads — which measure refining margins — have climbed above the outright price of crude. Mohit's point is that crude supply can return quickly, but refining capacity cannot, concentrating the pressure in product barrels.
On natural gas, bullish and bearish drivers are competing. Qatar's halt at Ras Laffan and low European storage support winter and first-quarter pricing, while U.S. storage above seasonal norms and a confirmed, strengthening El Niño point toward a warmer winter and a heavy end-of-season balance. With bearish positioning crowded, the hosts flag room for sharp short covering — and note that cold in two of the three major demand regions can still produce winter fireworks.
The full episode covers spec positioning, the LNG picture, and hurricane-season considerations.
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