The oil market came under significant pressure yesterday as the market digested Israel’s long-awaited response to Iran’s recent missile attack. ICE Brent settled more than 6% lower on the day leaving it at just below $72/bbl. As we mentioned yesterday, the targeted response from Israel does leave the door open for de-escalation, which would allow fundamentals once again to be the dominant driver for the market. And fundamentals are expected to be bearish through 2025. Given the geopolitical uncertainty, many market participants have been protecting themselves from potential spikes higher through the options market. This was not only reflected in traded volumes and open interest in the options market, but also the option’s skew. However, this skew has narrowed significantly since the end of last week, highlighting the broader market view of reduced upside risk.
The Biden administration is looking to buy up to 3m barrels of crude oil for the Strategic Petroleum Reserve (SPR) for delivery at the Bryan Mound site from April-May 2025. The Department of Energy has so far bought more than 55m barrels of crude oil for the SPR at an average price of $76/bbl, compared to the roughly $95/bbl the DoE received from emergency sales in 2022.
The jet fuel market in Asia is showing a lot of strength at the moment and this is reflected in the jet regrade which has spiked higher in recent days. The strength in the regrade has been attributed to run cuts at refineries, while earlier this week there was a rare Chinese import tender for two cargoes of jet fuel.