WELCOME TO THE NEW ERA OF STATE-CONTROLLED CRUDE OIL PRICESDear subscribers, as you’ve noticed, over the past 72 hours I’ve slept very little while monitoring the crude oil market. I don’t think I’ve ever pushed my brain this hard on a single issue. Fundamentally, the crude oil crisis is worsening; there’s no doubt about that. The same is true of the war in the Middle East, which is expanding and intensifying. So is the manipulation of crude oil prices. And when the administration in charge is going to sell Wall Street instant access to President Trump posts legalizing insider trading, rational short-term trading in the oil market becomes pointless: prices will move only when the apparatus controlling them decides to move them, as happened on Monday. For this reason, I believe the crude oil price chart will start to resemble the Fed Funds rate chart - a staircase of moves up or down. Consider what happened over the past 10 days: the war already resumed last week, when Iran declared the Strait of Hormuz fully shut and the U.S. began retaliatory attacks. Yet the public/private partnership controlling crude oil prices allowed the price to move only when the resumption of the war became “official” on Monday, as the U.S. administration announced its intention to take full control of the Strait of Hormuz and abandon any effort to find a diplomatic solution. If the market were free, efficient, and forward-looking, crude oil would already be back above at least 120$. But when the grip on trading is extremely tight, and data and information are also heavily manipulated and filtered to support that effort and manufacture a narrative, short-term trading becomes a prediction market on the decisions of those who set the outcome. For examples, please see my review of this week’s EIA report here ( https://app.slice-app.io/posts/b09cb98b-32fb-423e-b269-48ffec24483d ), or consider the attacks on the Basra oil terminal in Iraq, which occurred on Wednesday and were repeated on Thursday, yet the information was withheld from markets until the threat subsided ( https://www.reuters.com/business/energy/crude-oil-loading-suspended-all-iraqi-terminals-after-drone-incident-sources-say-2026-07-16/ ). On Thursday, the Houthis stated they would shut the Bab-El-Mandeb Strait if Iranian infrastructure were attacked. A few hours later, the U.S. destroyed a strategic bridge near Bandar Abbas. The market reaction? ZERO. Yes, the price started to move when the Houthi threat began spreading on social and mainstream media ahead of the U.S. market open, but everyone saw what happened: the price was crushed all the way down to 79.60$, exactly the previous day’s settlement price. Likely this coming weekend, the U.S. administration will announce an expansion of the military campaign beyond the Strait of Hormuz. But I expect them to be very careful not to hit any oil infrastructure, so as not to trigger Iranian retaliation against neighboring countries’ oil infrastructure. Iran has made it clear it is not at war with its Arab brothers; for the time being, this means asymmetric war is off the table, and any retaliation will be equal to the attack received. Not surprisingly, Iran hit the bridge connecting Bahrain with Saudi Arabia - an eye for an eye. Traffic in the Strait of Hormuz is back down to virtually zero, especially for oil and LNG tankers. The current gap between oil supply and demand remains ~10 mbd negative. This means crude oil inventories around the world, both SPR and commercial, will keep declining no matter what, especially for high-sulfur crude oil, a significant share of which came from the Middle East. High-sulfur crude oil is used to make diesel (more on this soon). On Thursday, the EIA published an article ( https://www.eia.gov/todayinenergy/detail.php?id=67866 ) explaining what “tank bottoms” are. What a coincidence, right? But no worries: crude oil prices won’t be allowed to rise unless the central apparatus sets a higher ceiling. Hilariously, this is exactly what Japan, a notorious market manipulator, has been doing with the JPY in recent years. They’ve done the same with JGB yields, successfully controlling the whole curve for a long time until market forces finally broke their grip and yields began to skyrocket, especially in long-duration maturities. This is how crude oil prices are going to behave in the future. And if President Trump forces them all the way down to 55$ once he decides the war with Iran is over, even though we know that’s not going to happen for years unless the U.S. hands control of the Strait of Hormuz to Iran, in the long run, market forces do ultimately prevail, as happened with the JPY, gold, and silver, all of which broke decades of heavy market manipulation. Why do they prevail? Because if a commodity’s price becomes uneconomical for operators to extract and sell at a fair profit, they will scale back capex and production, exacerbating supply shortages until prices are forced to adjust. That’s essentially what happened to silver. It won’t take 40 years for crude oil, because it is the blood that carries oxygen around the global economy. The market is too busy and obsessed with AI companies to notice that the next major bull run may be in the stocks of crude oil companies that remain obscenely undervalued - especially companies without assets in the Middle East, operations near the Russian-Ukrainian warzone, or with access to high-sulfur oil basins like CNRL, Suncor, Chevron, ConocoPhillips, Exxon, and Occidental Petroleum. Another thing the market is ignoring is that there is a part of the oil market the government cannot control as effectively as it would like: diesel. As you can see in the chart here, since the beginning of the war against Iran, the tight correlation between crude oil and diesel prices began to break on the very day the ridiculous MoU with Iran was signed. Another thing the market hasn’t noticed is that the U.S. administration stopped threatening distributors for not lowering prices at the pump. Not all oil is the same, unfortunately. The shortage of high-sulfur oil is now starting to become acute. Even if its wholesale price remains government-controlled, the physical shortage will strain the supply chain and create an inevitable shortage of diesel. That shortage is exacerbated by the successful Ukrainian campaign against Russian refineries, to the point that Russia has already been forced to ban diesel exports, and prices at the pump are skyrocketing in many regions despite Russia being a country rich in crude oil. Inevitably, all diesel (heating oil, jet fuel, and retail diesel) will see its price rise higher and higher in the near future, and I won’t be shocked if this market suddenly breaks and prices skyrocket one day when panic hits. Unfortunately, countries do not have Strategic Diesel Reserves they can use to effectively manipulate their prices as it has been happening with crude oil. For reference, this is the list of refining companies that sell a significant amount of diesel around the globe Marathon Petroleum Corp. – MPC (NYSE) Valero Energy Corp. – VLO (NYSE) Phillips 66 – PSX (NYSE) HF Sinclair – DINO (NYSE) Par Pacific Holdings – PARR (NYSE) Delek US Holdings – DK (NYSE) China Petroleum & Chemical Corp. (Sinopec) – 600028 (SSE) / 00386 (HKEX) Sinopec Shanghai Petrochemical – 00338 (HKEX) North Huajin Chemical Industries – 000059 (SZSE) Indian Oil Corp. (IOCL) – IOC (NSE) / 530965 (BSE) Hindustan Petroleum (HPCL) – HINDPETRO (NSE) / 500104 (BSE) Bharat Petroleum (BPCL) – BPCL (NSE) / 500547 (BSE) Thai Oil – TOP (SET) PTT Global Chemical – PTTGC (SET) S-Oil – 010950 (KRX) Cosmo Energy Holdings – 5021 (TSE) Bangchak Corporation (formerly Bangchak Petroleum) – BCP (SET) Galp Energia – GALP (Euronext Lisbon) BP p.l.c. – BP (NYSE/LSE) Equinor – EQNR (OSE/NYSE) Crude oil is no longer trading like a free, forward-looking market - it’s increasingly trading like a policy variable, adjusted in discrete “steps” when the controlling apparatus decides the narrative and the timing are convenient. Meanwhile, the underlying fundamentals keep tightening: disrupted flows through key chokepoints, persistent inventory drawdowns, and a growing shortage of high‑sulfur barrels. That combination matters because it shifts the real pressure point from headline crude to refined products, especially diesel, where physical constraints are harder to cap with rhetoric or strategic reserves.
