Market Spinning After ‘Most Epic Price Reversal in Oil History’

The market is spinning after the most epic price reversal in oil history, Phil Flynn, a senior market analyst at the PRICE Futures Group, told Rigzone on Tuesday.

“Rising hopes that the war may be coming to an end soon after comments by Trump, as well as a coordinated oil release talk, is easing the market’s panic,” Flynn said.

“Also, a growing sense that more tankers and ships might try to sneak through the Strait of Hormuz is causing a bit of hope after the biggest supply disruption in modern history,” he added.

In a market comment sent to Rigzone today, Aaron Hill Chief Market Analyst at FP Markets, flagged oil’s “wild whipsaw”, noting that “price action was hard-hitting on Monday”.

“Energy markets were the epicenter, with WTI oil breaching the psychologically meaningful $100 mark … before reversing sharply,” he said.

“It was quite a move from top to bottom and demonstrates the influence a handful of headlines from U.S. President Donald Trump have on the markets,” he added.

In a press note sent to Rigzone on Tuesday, Wood Mackenzie warned that $200 per barrel oil is possible if the conflict extends.

“While oil reached $150 per barrel in inflation-adjusted terms during the 2022 Russia/Ukraine crisis, this situation could prove more severe,” Wood Mackenzie warned.

Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, said in the note, “supply volumes at risk this time are dimensionally bigger – and real”.

“In our view, $200 per barrel is not outside the realms of possibility in 2026,” he added.

In that press note, Wood Mackenzie stated that, with 15 million barrels per day of Gulf supply suddenly offline, global oil demand will need to fall to rebalance the market. That’s a process that could require prices to reach $150 per barrel, the company highlighted in the note.

“The scale of disruption is unprecedented,” the company warned.

“Gulf countries in total produce 20 million barrels per day of liquids, and 15 million barrels per day of exports have been taken out of the global market. The industry has never faced a loss of supply volumes of this magnitude,” it added.

Flowers also warned in the note that, “when the conflict ends, cranking up the supply chain won’t be swift”.

“Product barrels in storage at refineries or in port might be moved on vessels quite quickly. But if wells are shut-in for a prolonged period, restarting production to full output could take weeks or even longer,” he pointed out.

Wood Mackenzie noted that competition for remaining barrels already pushed prices above $100 per barrel early this week and said markets dependent on exports have been particularly exposed across multiple regions.

In the press note, Wood Mackenzie warned that strategic petroleum reserves offer some relief but said they cannot fully offset the supply loss. Alternative supply sources also cannot fill the gap, according to the company.

“Prices will continue to escalate as the conflict prolongs,” Wood Mackenzie warned.

“Much will depend on how long the war lasts, how long the Strait of Hormuz remains closed, and if the U.S. Navy can ensure safe passage of vessels by escorting shipping,” Flowers said.

“Global oil demand of 105 million barrels per day will still have to fall to balance the market and in our view, that will require Brent to push up at least to $150 per barrel in the coming weeks,” he added.

Wood Mackenzie noted that, at this price level, demand would fall through multiple channels; “industrial users curtailing consumption, transport substitution away from oil-intensive modes, economic contraction reducing overall activity, and consumers reducing discretionary travel”.

BMI analysts stated, in a report sent to Rigzone by the Fitch Group late Monday, that the initial reaction to the U.S.-Iran war was relatively muted, “reflecting expectations of a short-lived conflict”.

“Weak underlying market fundamentals, and the scope for a swift reversal in conflict-related disruptions to supply, deterred traders from buying into a more aggressive rally,” the analysts said in that report.

“However, a near complete halt to transit in the Strait of Hormuz, upstream shut-ins due to limited storage capacity, and the expanding attacks on the oil wider complex in the region have put severe pressure on the physical market and the consensus narrative is shifting rapidly in response,” they warned.

“Price action now reflects expectations for a more widely spread and durable impact on global oil trade, better aligned with our mid-case conflict scenario for Brent,” the analysts went on to state.

To contact the author, email andreas.exarheas@rigzone.com