We know what’s coming and we are prepared.
š¢ āWhy arenāt oil prices higher?ā āHow can the oil market be so complacent?ā
Oil prices almost always trade to extremes. Right before it does, it always gets āobviousā from a fundamental setup standpoint.
I remember a great conversation I had with Nelson Wu of Open Square Capital about the oil market being analogous to toilet paper. You donāt realize how badly you need it until you run out of it.
Oil prices trade on the margin. As long as there are onshore inventories to draw from, traders donāt panic. Itās when you run low on onshore inventories that panic starts to set in.
Goldman published an update on Thursday that basically captured the storage math phenomenon that we are seeing:
Global visible total oil inventories remain bloated relative to historical standards. If, for example, we had started the conflict with global oil inventories at the 2025 lows, WTI and Brent would already be above $200/bbl.
The ~1.4 billion bbl cushion at the start of 2026 is what gave the US time to navigate the Iranian conflict without the oil market blowing up. It was also the same reason why at the beginning of the conflict, I wrote a piece titled, āWhy Arenāt Oil Prices At $100?ā
But fast forwarding 6-weeks later, the facts have changed. The conflict is ongoing, and that onshore cushion you are seeing in storage is nothing but a mirage. Even if the conflict ends this very second and everything returns to normal, that oil inventory is gone.
Vanished. No more.
In essence, the oil market really should be pricing forward balances as if we are already near 7.6 billion bbls, but itās not, and this creates the biggest mispricing trade since the COVID lockdown (short oil) trade.
Oil traders, the physical guys, lack both the means and capabilities to drive financial prices higher. Financial markets are exponentially larger than the physical side, but thereās one quirk: expiry.
As the futures market approaches expiry, people who continue to hold the contracts are obligated to deliver the goods (literally). This mechanism will be tested first at the May WTI expiry, where the physical market is already quoted at a +$20 premium to financial prices. It will be tested again in the Brent expiry at the end of the month.
What will happen is that as we get closer to the expiry, market participants who are short have to cover because thereās no way in hell they can deliver the goods physically.
We are literally going to run out of available commercial crude storage. This will force the prompt month higher, which will suck in financial flows into the June contracts. This inflection point will shock market participants awake.
This is one of the main reasons why Iāve remained so calm over the past few weeks. The math is what it is. The Trump administration can jawbone oil prices all they want. Axios can publish whatever headlines it wants, but the reality will be swift and vicious. If you do not have the means to deliver the goods, you have to cover.
š HFI Research
Speaking at the WEF, Savor CEO Kathleen Alexander boasts about how her company is "saving the planet" from the evils of agriculture by replacing real butters and oils with synthetic versions made from carbon dioxide and methane. š³
"Savor is part of bringing transformation to the food system by re-imagining how we make an entire macronutrientāfats and oils."
"The result is that we can dramatically lower the planetary footprint of our food system."
"Our food system today uses about 50% of the habitable land on the planet. It's 20-30% of our greenhouse gas emissions."
"And we can reduce all of those by 50-100%."
Source
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š Market News Digest
[July 3, 2026 EST]
š„ Top Stories
ā¢ Middle East risk flares ā IDF hits Hezbollah sites in south Lebanon; Houthis threaten Saudi assets; France deploys naval/mine-countermeasure assets near Hormuz.
ā¢ U.S. oil market scrutiny ā DOJ/FTC say theyāre monitoring crude for price-fixing/collusion as Brent settles at $72.12/bbl.
ā¢ Trump pardons saga ā Trump signs pardons for six and faces fresh scrutiny after NBC reported undisclosed stock purchases before tariff pause.
ā½ Oil & Energy
ā¢ Gulf crude exports topped 10M bpd in June but remain ~40% below pre-conflict levels; Fitch flags ongoing Iran/Mideast risk to corporates and oil forecasts.
ā¢ CMA CGM warns Hormuz transit charges would be ādevastatingā; Airbus says defense cooperation remains pressured.
š Markets & Macro
ā¢ Germanyās 2027 draft budget lifts borrowing to ā¬203.7B and spending to ā¬555.4B; euro equities firm with DAX +0.85%.
ā¢ ECB/BoE message: inflation still the focus, but Bailey says UK ...
š®š·ššŗšø Iran Is a Bigger Defeat Than Vietnam | Foreign Policy
At his second inaugural, U.S. President Donald Trump pronounced his hope āthat our recent presidential election will be remembered as the greatest and most consequential election in the history of our country.ā By losing his Gulf war, Trump has achieved that goal. His choice to launch a campaign against Iran was encouraged by others, but fully his own. It has led to a reversal that marks a strategic calamity far greater than the U.S. defeat in the Vietnam War.
Defeat in the Iranian war looks, on the surface, nothing like other U.S. military defeats. The speed of the war and its remoteness have lent an air of unreality to the whole endeavor. The White House has not been burned, as it was in 1814; there have not been protests against a nonexistent draft. The absence of substantial U.S. casualties in this conflict also masks the scale of the U.S. defeat. To be sure, the war has been deadly: Thousands of Iranians, ...
According to The Wall Street Journal, Donald Trump reviewed military options for a full-scale war against Iran to āfinish the job,ā but has decided, for now, not to move forward.
The report says Trump is concerned that renewed military conflict could hurt the chances of a diplomatic resolution and of dismantling Iranās nuclear program, and that heās shown willingness to let indirect talks in Qatar run past the August 18 deadline. He is said to be fine with continuing limited strikes on Iranian targets if Tehran violates the current temporary deal - as it already has, repeatedly.
How are those negotiations going?
Not well. It seems JD Vanceās āhistoricā face-to-face achievement was a one-off. Washington has been quietly downgraded from talking to the Great Satan to negotiating with the Little Satan instead - a senior Qatari official confirmed that U.S. envoys Steve Witkoff and Jared Kushner met Qatari officials in Doha, but there are currently no high-level U.S.-Iran meetings ...
