Will US President Trump start a war with Iran?
That’s the big question oil traders are struggling with. Yesterday, a report from Reuters suggested that attacks were imminent and that was combined with the UK closing its embassy and evacuating staff. It led to a jump in oil prices to the highest since October but it was a short-lived pop as yesterday afternoon, Trump seemed to de-escalate.
He highlighted that executions for protestors had been stopped, along with the killing in the streets. That’s hardly consolation for the protesters that he was encouraging a day earlier.
“Iranian Patriots, KEEP PROTESTING – TAKE OVER YOUR INSTITUTIONS!!!… HELP IS ON ITS WAY,” Trump said in a post on Truth Social.
So help is life in prison instead of execution?
The oil market no longer seems to think that military help is coming. WTI crude oil is down $2.96 today, to $59.08, nearly erasing the three-day rally as tensions in Iran rose.
Notably, though, it’s not all the way back to the $56 it traded at last week. Maybe we’re underestimating the President’s resolve?
The Venezuela operation was launched on a Friday night and tied up before Monday’s market open. That seems to be a pattern with the President and it argues for buying oil on Friday. I wouldn’t necessarily argue for holding it through the weekend as there is the risk of a gap lower if action doesn’t materialize but buying early Friday and selling late Friday might capture the weekend nerves without making a bet on what will actually happen in Iran.
Taking a larger view in the oil market the problem is oversupply and it’s a tough one to solve. Yesterday’s weekly EIA report showed a build of 8.6 million barrels of gasoline supplies in the US following 7.7 mb the week before. The chart shows how extraordinary those builds are.
In a note today, Scotiabank argues that the global oil market is entering a period of severe imbalance that will prevent prices from recovering without intervention. They forecast that global oil supply will exceed demand by more than 2.0 million barrels per day in 2026. Specifically, they expect the surplus to be nearly 3.5 mmbbl/d in the first half of 2026, narrowing to just under 2.0 mmbbl/d in the second half.
Scotia says the market is underestimating Brazilian growth this year, which they peg at 600k bpd.
Contrary to consensus, Scotiabank does not believe the market will self-correct. They argue that prices will remain depressed until Saudi Arabia abandons its market share strategy and OPEC+ returns to the negotiating table to implement new cuts, which the analysts do not expect to happen until 2027.
These forecasts are hardly a call for buying oil and they help to explain why positioning data is so short:
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2026 Average: $49.72 per barrel
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Q1 2026: $54.00 per barrel
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Q2 2026: $51.00 per barrel
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Q3 2026: $48.00 per barrel
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Q4 2026: $46.00 per barrel
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2027 Average: $55.00 per barrel
I like the idea of buying at $46 for the long term.
This article was written by Adam Button at investinglive.com.