Newsletter · · Ashutosh Agarwal
Crude Round-Trips to $70 as the Oil War Ends on the Tape Only - Oil: OPEC+, Shale & Geopolitics - Week of June 29 to July 3, 2026
Crude booked its worst quarter since the 2020 COVID crash and round-tripped to $70 as a U.S.-Iran truce drained the war premium, yet Iran struck a container ship in Hormuz mid-week with inventories at a 43-year low. Our synthesis of the oil podcast tape for the week of June 29 to July 3, 2026.
Oil: OPEC+, Shale & Geopolitics
Week of June 29 to July 3, 2026: Crude Round-Trips to $70 as the Oil War Ends on the Tape Only
The war is over on the tape only
Crude just booked its worst quarter since the COVID crash of Q1 2020, and the strait that caused it is still smoldering. WTI sits right on $70, which, as Rory Johnston of Commodity Context noted on Macro Voices, "happens to be the contract 200-day moving average, major support level, and about where we were before this conflict began." Morgan Stanley cut its forecast for the second time in about two weeks, now looking for just $70 Brent at the end of 2027, per Bloomberg Surveillance. Yet mid-week Iran hit a container ship in the Strait of Hormuz, triggering tit-for-tat strikes Kuwait and Bahrain had to intercept with strategic inventories at a 43-year low (Bloomberg Daybreak), and is "doubling down" on a toll it wants to charge, as much as $40 billion a year, once the 60-day window closes (Bloomberg Daybreak). The tape says the war is over. The water disagrees.
Why crude became the weakest link
The most useful frame came from Johnston, who owned his blown $150–$200 call months ago. The market is flashing "a spot surplus of crude oil... because the front of the futures curve for Brent and for Dubai... is in contango... too much supply relative to spot market demand." The mechanism: "125, 130 percent of pre-war supply surging out of the Middle East" crashing into an Asian market where China's crude imports fell a "five million barrel a day delta," which he framed as "a discretionary policy choice by Beijing" rather than genuine demand destruction (Macro Voices).
Crucially, crude is now "the weakest part of the petroleum market." Refined-product cracks are "exploding," diesel "around 60 bucks a barrel versus... a norm of like 20 ish," because the refineries that actually consume crude are hobbled in the Gulf and bombed in Russia. But Johnston flags the offset: "a near-record accumulation of short interest," nearly back to last December's all-time highs, so "we're probably pretty close to the bottom here in terms of flat price," with "six to $10 a barrel on upside from spec positioning normalization alone."
Warren Pies of 3Fourteen Research made the same positioning argument on Excess Returns: China "killed about 4% of global oil demand, just like overnight," managed money is "about a 40%... short position, which in my framework is extreme pessimism," and positioning "is the single best signal" of the last decade. His read: a short-covering "spike... back to 85, 90 [Brent]," but a long-term clearing price of only "75, 80." BMO's Ian Lyngen and Ben Jeffery captured the vibe shift on Macro Horizons: the conversation "shifted from whether or not the new floor will be $80 a barrel, to whether or not we should be worried about a medium-term supply glut" that drags crude back toward the pre-war $55–$65 zone.
The money on the line, and one loud dissenter
Separate the people with capital in the trade from the strategists. They are leaning long into the weakness. Doug Casey told Doug Casey's Take oil "has reached a new base level at... $65 to $70 at a minimum," making him "more bullish than ever on oil stocks," just 4% of the S&P versus 20% at the 1980 peak, "some... yielding up to 10%," while Trump "has done an amazing job of jawboning the oil markets down... and yet the fundamental issue is unresolved." Jesse Felder, on The Competent Investor, called it "the most bullish supply demand backdrop for oil that you could possibly imagine": the fastest three-month SPR depletion "that we've seen," total inventories "lower than they've been in 40 years," demand at records, so "oil prices [are] at least $50 below where it would trade," i.e. "$120 oil." His tell: "insiders... buying hand over fist" in Canadian and U.S. energy names, and "no hedging going on right now." Josef Schachter, on The KE Report, says WTI is "in cheap territory again," models "$90 WTI for 2027," and is waiting on a buy signal to move "to 100% of my target energy weighting," something he hasn't done "since 2020."
The sharpest dissent came from a trader, not a pundit. John "JJ" Johnston, also on The Competent Investor, called the whole episode "a great big nothing burger": the U.S. went in with "8.2 billion barrels according to the EIA," the SPR draws were "term repos" (172 million barrels lent, repaid with "25% more," not sales), and "there's plenty of oil around... the front spreads are very weak. Brent's in contango." His fair value: "70-ish, maybe a little lower." He even called out the CEOs of Chevron and Exxon for pushing a "tank bottom" narrative, rare operator-level pushback on the empty-tank bull case, and worth respecting.
The pundits split: glut vs. snap-back
The bears want it lower: Mike McGlone of Bloomberg Intelligence reiterated a H2 base case "below" $55 and "potentially towards $40," arguing OPEC's "redundancy" and its "price maker status shifting to the Western Hemisphere," with Iran able to "sell crude oil on an open market finally," and Trump needing "lower inflation" for the midterms. Morgan Stanley's double cut sits in the same camp. The snap-back bulls counter that the market has over-corrected: economist Steve Hanke told The David Lin Report the world "borrowed 1.2 billion barrels of oil from the future," all of which "will have to be replenished," pinning "my baseline case... probably around $85, $90 a barrel." Rebecca Babbin of CIBC Private Wealth, on Bloomberg Surveillance, holds Brent $80 / WTI $75, warning the market is "overestimating the pace of production recovery while underestimating future inventory rebuilding demand," and noting even Morgan Stanley's cut leaves its target "above the strip."
OPEC frays, the strait hardens
Daniel Yergin tied it together on Hidden Forces. OPEC "was basically a stabilizer for oil prices"; with the UAE out and Iraq now threatening to leave over its quota, "maybe you won't have that stabilizer there," meaning "more price volatility." Having read the MOU "a few times," he thinks the Iranians "intend to... turn the Strait of Hormuz into an Iranian canal," if not tolls, then "environmental fees, navigation fees, insurance," via a new Persian Gulf Strait Authority. He dubbed it "Schrödinger's Strait": "you don't know whether it's open until you actually pass through it." Reuters' Timur Azari, on Reuters Econ World, put the durable point plainly: the "Hormuz genie is out of the bottle," and "future closures are now a real and persistent risk."
Bottom line
The market has priced the war as history. But the same three unknowns decide the back half: whether China restocks (Beijing's ~5 mb/d pullback is the entire soft patch), whether anyone actually refills the drained SPRs, and whether the strait re-escalates from truce into toll war. Positioning is the near-term tell: near-record shorts mean a headline could add $6–$10 fast. The money on the line (Casey, Felder, Schachter) is buying the empty tank; a credible trader (JJ) calls it a nothing burger; the strategists (McGlone, Morgan Stanley) see the flood. Watch the crack spreads, the spec short, and the Doha talks.