The Peace Trade Has an Inventory Problem
I delayed Friday’s recap because the market was already trading the possibility of a Mideast agreement, and by Sunday we finally had confirmation of a political framework. Asia is now open, so today’s quotes reflect the first real trade after the agreement headlines rather than only Friday settlement. The first reaction was clear. Energy gave back a large part of the war premium. WTI July traded at $80.54, down $4.34, or 5.11%. Brent August traded at $87.33, down $3.05, or 3.37%. Heating oil July traded at $3.2742, down 3.82%. ICE gasoil July traded at $967.25, down $64.50, or 6.25%. On the surface, this looks like a major de-escalation trade. The problem is the structure does not look normal yet. Gasoil July/December remains backwardated at $96/mt, July/August is still $17.50/mt, and June/July since June expiry is now marked at +$72.25/mt. Flat price is down, but the product curve still tells us physical distillate remains tight.
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