Disruption builds in oil markets

Oil markets are trading headlines, but the real disruption is still building, says Neil Crosby, AVP Oil Analytics at Sparta

Oil markets are becoming increasingly difficult to trade, as geopolitical headlines rather than fundamentals drive price action.

Recent price moves underline just how unstable conditions have become. Crude has swung sharply within minutes, reflecting both elevated positioning and the sheer unpredictability of political developments.

In this environment, even flat price is becoming unreliable as a signal of underlying market conditions.

At the same time, what is being presented as de-escalation may not represent a genuine shift. The lack of clear diplomatic channels and conflicting messaging suggests that recent developments are more about managing the situation than resolving it.

More importantly, there is a growing disconnect between crude and refined product markets. While crude prices have remained relatively contained, product markets, particularly diesel and jet, continue to reflect significant tightness. This divergence highlights a deeper issue: the physical supply crunch has not been resolved.

The key variable remains the Strait of Hormuz. Until there is clear and sustained evidence that flows through the strait have normalised, the market cannot be considered stable. And even in a best-case scenario, the process of restoring supply chains will take time.

Repositioning vessels, restarting refineries and rebuilding inventories are not immediate fixes. Even if flows resume, the system will take weeks, if not months, to return to anything resembling normal conditions.

That has important implications for pricing. While short-term moves may be driven by headlines or policy signals, the underlying balance remains tight. In that context, oil may still be underpriced relative to the scale and duration of disruption.

For traders, the focus is shifting away from flat price and towards physical indicators such as spreads, which better reflect real market stress.

This is no longer just a price story. It is a structural disruption, and one that is likely to persist.