One man's war is another man's windfall. The longer the Middle East conflict persists, the larger the gains for producer countries. The real price for Brent with immediate delivery topped $141/bbl, according to S&P Global — higher than at the start of the Russia-Ukraine confrontation in 2022. Isn't that reason enough to boost output?
In futures markets, prices are materially lower. However, for US producers to make money, WTI needs to be in the $62–70/bbl range. In reality, the Texas grade is trading above $100. Longer-dated contracts are cheaper. That creates a "now-or-never" situation that allows producers to capitalize on Donald Trump's "drill, baby, drill!" appeal.
Dynamics of spot and futures oil prices
Strong demand is driving up premiums on benchmark grades. In the US, premiums reach as much as $18/bbl. Saudi Arabia is selling its flagship Arab Light to Asian buyers at a record premium of $19.5. Riyadh can bypass the Iran-controlled Strait of Hormuz via pipelines and is actively doing so; the alternative route can carry roughly 5 million b/d.
The US could theoretically export twice that amount — a prospect that would surely please an administration focused on energy security — but constrained oil-infrastructure capacity limits realistic upside to about 5–6 million b/d.
Dynamics of Saudi crude premiums
Can OPEC+ help the oil market? At the summit, alliance members agreed to raise quotas by 206,000 b/d starting in May. In practice, that move is largely symbolic. Given conditions in the Gulf, members are unlikely to be able to materially lift output. At best, they may hold production at current levels.
The IEA argues that declining global supply, logistics bottlenecks, and a closure of the Strait of Hormuz make the current oil crisis larger than 1973, 1979, and 2022 combined. It is surprising that prices are not rising as fast as four years ago — perhaps Brent and WTI bulls expect President Trump to delay his ultimatum to Iran again, as he has done before.
But if the US does attack Iranian energy infrastructure and turns life there into hell, North Sea and Texas grades could resume an upward trend at the snap of a finger.
Technically, the daily chart shows that Brent bulls are attempting to hold above the moving averages. A 1?2?3 reversal pattern failed to complete earlier, which signals seller weakness. A necessary condition to re-establish the uptrend is a return of the North Sea grade to $114.5 and $117/bbl. Under that scenario, the risk of a rally toward $124 and $130 would rise, providing a basis for new long positions.
