Oil And Refined Products Swing Sharply Amid Conflicting Iran War Messaging

It’s already been a busy week’s worth of trading for energy markets, and we’re just a few hours into Monday’s session as rapid changes in the Iran war outlook lead to huge price swings overnight. ULSD continues to lead the action thanks in large part to its dual role as a transport fuel and natural gas supplement, making a 78 cent swing overnight after the U.S. President offered up something sounding like a conciliatory tone this morning, after the weekend ultimatum had prices rallying again to start Sunday night. The April HO contract was down 55 cents at its overnight low, but bounced all the way back to trading down just a couple of pennies and is currently holding around 20 cent losses for the day.

RBOB gasoline futures continue to follow ULSD, and had a 40 cent swing overnight from up 12 cents in the first few minutes to down 28 cents at their lows, which wiped out last week’s gains, before bouncing back to trade down “just” 16 cents on the day.

As has been the case for much of the war, conflicting accounts of what’s happening continue to roil markets, with suggestions that negotiations are going well from the U.S. President being contradicted by Iranian leaders, with reports this AM that there are no negotiations ongoing to end the war.

The hint of a glimpse of light at the end of this tunnel is also leading to a big overnight rally in equity futures that have taken a beating since the war broke out.

Money managers look like they’re trying to make up for the fact that they had the most money ever bet on lower oil prices late in 2025, which is obviously painful as prices have doubled since then, making huge increases in net length in the Brent crude contract again last week. The other contracts saw less enthusiasm by the big money bettors with small increases in net length in WTI, RBOB and ULSD, while Gasoil contracts saw a small decrease in large speculative length.

It’s worth noting that while crude oil contracts have seen big increases in daily trading volume and open interest, the open interest in refined products plummeted last week by the most we’ve seen since 2022, which was the last time the CME group increased margin requirements by this amount, which combined with steep backwardation squeezed some players out of the market. See charts below.

Baker Hughes reported an increase of 2 oil rigs active in the U.S. last week, while the natural gas rig count dropped by 2. The Primary Vision count of Frac Spreads dropped by 8 on the week, wiping out the gains from the previous 2 weeks.