Real Supply Risk
Israel launches attack on Iran
In this report: Geopolitical risk at max levels, Oil curve extreme change, C.O.T data, Iranian special analysis, Straits Of Hormuz relivence, Trade charts.
Below is how Thursday/Fridays political rhetoric developed before we got the Israeli attacks hours later. Thanks to NewSquak for the real-time updates and commentary. Paid subscribers to The Oil Report get 1 month full free trial and 30% off the 1st paid month. Get in contact for details.
Articles
LIVE: Israel launches ‘major strike’ on Iran’s military, nuclear sites
Strait of Hormuz – Factsheet
US oil/gas rig count falls for 6th week to 2021 lows, Baker Hughes says
Iran Update Special Edition: Israeli Strikes on Iran, June 13, 2025
EIA (U.S. Energy Information Administration) Iran’s energy overview
View
Early Friday morning, Israel launched airstrikes on Iran-and the swift Iranian response with over 100 drones targeting Israel-have abruptly yanked crude markets out of their geopolitical slumber. After 18 months of near-total indifference to global risk events, oil finally priced in fear. WTI futures surged as much as 13% early Friday as traders scrambled to reposition into the weekend. With time spreads hitting $4 on the front. The weird backwardation of 2025/Contango 2026 is now a pure backwardation curve.
Read below for Oil curve extreme change update, C.O.T data, Special detailed analysis and mapping of Iran, Hurricane season in depth analysis and predictions, Who has been storing oil, Trade charts
It’s a natural reaction—but perhaps a premature one. See below Iran section for details.
As of writing, there are no confirmed hits on key Iranian production infrastructure, nor on major refineries. According to regional sources, explosions were reported in Isfahan and Tabriz, but early indications suggest these were defensive strikes or intercepted drones. Still, this is a live situation, and further escalation cannot be ruled out. The weekend will be pivotal. Live coverage via Al Jazeera
Market Positioning: C.O.T Caveats
This week’s C.O.T. data (below) should be read with caution. The real repositioning will occur from Friday through next Tuesday, which is when the C.F.T.C. captures data. That means much of the geopolitical repricing won’t appear until the next release.
Revisiting Market Complacency
For the past 18 months, oil markets ignored geopolitics. Every rally toward $80 WTI was swiftly faded. I argued at the time that, aside from the occasional Houthi strike, these events posed little risk to real barrels. That view held—until now.
In hindsight, analysts have pointed out the more structural reason: there was ample spare capacity, both from U.S. shale and OPEC+. The market was oversupplied and comfortable.
By December, we expected OPEC+ to raise output. That decision was deferred-until April. Then came a wave of hikes: 411,000 bpd in April, again in May, and now approaching 1 million bpd. But here’s the rub: these barrels are not arriving as advertised. (See section below for production and inventory data.)
Chart: OPEC+ Spare Crude Capacity & Implied Stock Build 2016–2030. Source: IEA
The Demand Hit: Tariffs, Steel, and Silent Buyers
Meanwhile, demand remains weak. China continues to shun both WTI and Henry Hub exports amid its trade spat with the U.S., and new steel tariffs are battering U.S. upstream margins. “Drill baby drill” doesn’t hit the same when steel pipe is priced like gold. Rig counts are starting to reflect that pressure.
Enter: The Return of Geopolitical Risk
Now, we have a genuine threat. The Iran-Israel exchange brings with it the potential for real disruption to supply—not yet realized, but uncomfortably possible. Iranian Strait of Hormuz posturing, regional escalations, and Western involvement are no longer hypotheticals.
Talks between the U.S. and Iran were already stalled. As of this week, they are likely dead in the water. The diplomacy clock has stopped ticking.
Outlook
In the short term: bullish as expected BUT we can easily step back tensions and not sustain rallies seen overnight.
OPEC+ may be unable to deliver on supply promises.
U.S. production is cost-constrained.
China remains sidelined.
And now, geopolitical risk is finally pricing in.
But make no mistake: unless real barrels come off the market, this rally could fade like those before it.
Stay nimble.
A quick mention on Rig Counts. I have to say again, this is NOT the bullish story you think it is. Companies are working through D.U.C inventories.
IEA Short Term Energy Outlook (STEO) Summary
Published monthly by EIA. Report here.
‘‘Forecast U.S. crude oil production will decline from an all-time high of 13.5 million barrels per day (b/d) in the second quarter of 2025 (2Q25) to about 13.3 million b/d by 4Q26 because of decreasing active drilling rigs and declining oil prices.’’- IEA June 10th STEO
Supply Pressure Rising global inventories and production slowing post-Q2 peak weigh on oil prices
Energy Demand Surge Data centres powering record power consumption; renewables filling the gap
Fuel Transition Gas & coal losing share; renewables and biofuels expanding, though renewable diesel struggles
Hurricane risk elevated in 2025
S&P Global also offering up an in-depth map of the gulf of Americas/Mexico onshore facilities
MAPPING IRANIAN STRIKE ZONES AND ENERGY AREAS
Check the interactive map here from the Institute for National Security Studies.
Iranian nuclear Facilities:
Here’s what we know so far: although Israel’s Operation Rising Lion struck Iran’s nuclear and military infrastructure, no key nuclear sites have been damaged or are reportedly off-line.
Natanz (enrichment facility) was indeed hit-reports indicate explosions and structural damage, including underground halls and centrifuge floors
Fordow (deep underground enrichment plant) has not been affected, with IAEA confirming no operational disruption
Bushehr (nuclear power plant) remains untouched; no reported damage or radiation increase
The IAEA has issued statements confirming no rise in radiation levels at Natanz or surrounding sites
In short: while Natanz sustained damage, Iran’s other key nuclear installations-Fordow and Bushehr-are intact, and there’s no indication of any radiological release or nuclear disruption beyond the targeted site.
Why Hormuz Matters (2024–2025 context)
17-18 million barrels/day (Mbpd) flow through Hormuz (2024 est.)
This is ~20% of global oil consumption
Includes 70–80% of Gulf exports (Saudi Arabia, Iraq, UAE, Kuwait, Qatar, Iran)
Main buyers: Asia (China, India, Japan, South Korea)
Tankers: ~30–35/day transit; chokepoint is only 21 miles wide.
QUICK NOTE: China storage
The build in stores have been indicative that they were ready for all and any eventualities from Trump tariffs to WW3 breakout.
C.O.T data
Keep in mind, this data is captured by the C.F.T.C on Tuesdays on the close of trade. This setup will not account for position changes that occurred Wednesday forward. A lot of people make the mistake of thinking C.O.T accounts for all trade through the full week.
Analysis.
Commercials: 15% increase in Commercials short side. They are in the 89th percentile Long all time observations. You have 2 large, distinct groups-Drillers (naturally long-hedging by selling) and Refiners (naturally short, hedge by buying). So net net, it looks like refiners ramped up their purchases ahead of rising tensions and supply risks from further geopolitical pressures. The fact that OPEC+ are not able to produce at the stated higher levels was a clear warning sign to get long anyways. Seasonally, this was also inverse to what happened this time last year. They are approx 200k barrels longer than this date last June 2024.
Non-commercials (Large Specs): Increased longs 1.9%, decreased short interest 11.4%. They were not loaded up Long as of Tuesday for the explosion upwards in price. I would be sure this changed come Thursday- (see NewSquak notes above). Spread positions got a little unwound, however they are still extremely high on the all time observations- see charts below.
Non-reportable (Small specs): Increased Longs 7.8%. Increased shorts 4.9%. Looks like more people got long than short?- WELL, if we use the C.O.T tool effectively, we can see that Small specs are crowded short at 89th percentile short in last 5yrs. While only in the 9th percentile, long. Small speculators will be ‘'ouching’. I hope it pulls back for them!
The Curve
Commercials locked in some of these high prices for later delivery months as the forward curve in contago looked good (Chart A below). Relatively high prices into 2026. They sell into these highs to lock in high prices for delivery later. The higher we go, the more they sell into it.
Chart A. Brent Oil forward curve in Backwardation to Caontango. PRE Fridays drama. With the Israeli attack on Iran, the 2025 prices then opened Friday's electronic session 13% higher, pushing the whole oil curve into Backwardation (chart B below), from what was in contango through 2026 (chart A above)
Chart B. Full backwardation- Post Fridays drama.
TRADE
The geopolitical tensions are still high. Price risk is firmly skewed to the upside. So for me to know which way this market may go, is to know what will the situation will flop. One thing that helps is that, currently, NO Production or refinery ops in Iran have been hit, so we are overpriced for the reality here. The market is pricing in risks not yet present. Commercials will want to lock in these high prices and will sell a lot of contracts come the reopen of trade for the week…. If nothing materially changes………… If it does change where any of the below happen, we will immediately price to the upside.
1: Closure of the Straits of Hormuz.
2: Israeli strike on Iranian production, refinery, or oil/ gas export terminals
3: Entry of U.S military into the region to bolster Israels position. Dispatch of U.S navy forces to Gulf Of Aden, Gulf of Oman. There is a small existing presence.
