Iran war drains US oil stocks to lowest level since 2004 | Hacker News Reader

Iran war drains US oil stocks to lowest level since 2004

ft.com

61 pointspetethomas20 comments

Everyone’s talking about an oil price spike if stocks are depleted, but the heavy backwardation of crude oil futures tells a completely different story. Who is right? Are crude oil traders, who I’m sure know exactly how much remains in reserve, on Chinese fentanyl, or is something else going on?

There was a press release by Exxon a couple of days ago with claims of prices hitting 150.

People have been making similar claims for months, but it hasn’t happened. The forward curve has been backwardated for quite a while now.

Is it Exxon doing a please buy our oil while it’s high, or is something else going on? Pray tell.

It's possible that oil traders are still trading on the assumption that the war will be over Soon™, in which case the expectation is that we won't hit the bottom of our stockpiles and thus there'd be no reason to price in that eventuality. I don't know if I agree with that, and I would certainly be surprised if traders generally thought as much -- but who knows!

No. If you read 2-3 articles about the war in Iran per day, be sure they read 20 or 30, and they probably use LLMs to summarize 3000. For us, it's only the feel-good of being smart. For them it's money.

So? Maybe that extra information points them to believe that the war will be over soon, even if I don't agree. Isn't that what I said?

There are other possibilities.

- This is a situation they’ve never faced before. It’s hard to simulate and betting on high prices may not be a great bet. Especially given that oil futures aren’t like buying options. You actually have to take delivery.

- They’re expecting a recession.

- They don’t want to invest the money In aggregate that they’d have to in futures to raise the price above certain levels.

- They suspect a lot of oil consumers will simply shut shop and end demand since those prices won’t be sustainable for many businesses. Airlines are already canceling flights.

- They expect the blockades to end sooner rather than later.

Options on crude oil futures settle in the underlying (futures), which settle in the underlying (oil) at expiry of the futures contract. Futures positions can be closed without giving or taking delivery.

You give some interesting ideas to think about, however if we predict everyone shuts up shop in the future, then I don’t see near price of oil going to 150.

There is another possibility: "they" are interested parties working to keep futures down as long as possible. When the space shuttle Columbia re-entered with a massive hole in its wing, the control systems kept it stable for quite awhile, until finally the vehicle went so far out of the control band that it could no longer compensate and it disintegrated. We may be seeing the same thing happen on a much larger system that is experiencing conditions outside of its operating history.

I would listen to commodity traders before politicians or anyone.

Strategic stocks will get depleted - demand will remain high whether the strait opens up or not due to so much pent up demand.

> Everyone’s talking about an oil price spike if stocks are depleted ...

Oil prices are determined by expected future cost and are only influenced by national reserves in the short-term.

> ... but the heavy backwardation of crude oil futures tells a completely different story.

This assertion is belied by Brent oil prices since the beginning of 2026[0].

> There was a press release by Exxon a couple of days ago with claims of prices hitting 150.

Again, referring to the cited Brent oil trading price[0], it has already hit 118 twice this year.

> People have been making similar claims for months, but it hasn’t happened. The forward curve has been backwardated for quite a while now.

This is demonstrably incorrect, as previously identified.

0 - https://markets.businessinsider.com/commodities/oil-price?op...

Oil prices are indeed determined by the expected future cost, including expected future reserves, and not only current reserves. Futures expiries extend quite far. Where does your short term reserves claim come from? Genuinely interested.

Regarding 118, this is about probability. Given we're at 96 and backwardated? What is the probability that we hit 150?

> Where does your short term reserves claim come from? Genuinely interested.

Familial experience in one of the major US energy (oil) corporations headquartered in east Texas.

> Regarding 118, this is about probability. Given we're at 96 and backwardated?

The 118 peaks are separated by 4 weeks and the local minima of 92 from a week ago has already risen to almost 98 as of 6/3 close-of-business. This does not support a backwardation trend and, instead, could be reasonably identified as the beginning of another spike.

> What is the probability that we hit 150?

This is a question energy executives must answer. Fortunately, one did:

  The price of physical Brent oil cargoes will spike to $150 
  to $160 per barrel when inventories hit all-time lows in 
  coming weeks, the executive said. “When the price gets to a 
  certain level, demand destruction brings it back into 
  balance,” he said.[0]

0 - https://www.cnbc.com/2026/05/28/oil-inventory-exxon-strait-h...

So what do you think the true reason is that the market is so backwardated? (another genuine question)

> So what do you think the true reason is that the market is so backwardated?

It is not.

The only way to support a backwardation claim is to ignore the 24 months of pre-war market behavior. If analysis is limited to the last three calendar weeks, then the local minima might be called a backwardation.

Problem is, there are no geopolitical, market demand, and/or military indicators to support this point in time being an actual backwardation.

Something definitely seems rotten in The Kingdom of Denmark with respect to the price of oil but I guess the market knows best. What that knowledge is, I don't know.

If anything it's surprising the price of natural gas hasn't gone higher considering ~20% of the supply is going to be inconsistent for 2+ years.

How can it go higher if exports are limited by liquefaction capacity which is already being expanded at the fastest pace technically possible and won't expand any faster in any case? US is the world's by far biggest producer, already world's largest net exporter (narrowly though), and sits on a massive natural gas glut which it can't physically export until very long lead time items are produced and put in place. So natgas prices are bound to remain low in the US no matter what.

For natural gas it's 20% of seaborne gas, traded LNG but it's only 2 or 3% of all methane gas which is often used locally and moved via pipelines.

Though obviously has bigger impacts on the places that did rely on LNG because they didn't have (enough) local pipeline gas.

Why are stocks relevant at all if the US is the largest producer and a 3rd largest net exporter? It's not like there's any chance that there will be oil shortage in US.

For now, US not only exports a lot of oil, but it also imports a lot of oil, and those quantities cannot be compensated, because it is not the same quality of oil.

Thus there can exist oil shortage in US, simultaneously with exporting great quantities of oil.

Not really because to make gasoline, both sorts are necessary. When anyone in the world makes gasoline they need oil they import from the US and they don't need/can't substitute it with the kinds of oil US imports. So there cannot be a shortage. In addition, it is the US oil (lighter sorts) that are in more shortage worldwide because Gulf states produce similar ones and supply from there is choked. US imports heavy oil and it is abundant and will be even more abundant now when Venezuela's supplies will be returning online. It gives US a bigger advantage than it sounds.

We're not great at refining to our own crude (I've seen people contemplate if this is one of the reasons we overthrew Venezuela's gov)

California especially is import heavy and we aren't super well connected to the pipelines the midwest/east coast have.

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