Oil Narratives

Oil market overoptimism prevailing… for now

Oil Narrative

Crude markets largely back to pre-war levels with contango returning and visible uptick in Hormuz transits. "Return to normal" sentiment prevails, though positioning data shows massive net-long reversals.

The risk-off theme is relentlessly bearish but cannot continue unabated. Real supply risks remain: sporadic attacks on vessels, US jawboning, and Iranian agreement finalisation details still to emerge. Chinese spot buying remains absent despite recent flat price decline.

West of Suez risks have surfaced: European refinery run cuts from extreme heat, Russian diesel export ban risk, and a closed WTI arb—bad news for refiners seeking cost-effective feedstock.