Key facts
- Commodity Trading Advisors (CTAs) are positioned at maximum long across Brent, WTI, and refined product markets.
- Standard Chartered noted this CTA positioning is at a configuration seen only a handful of times in the past decade.
- Further crude oil price gains depend on discretionary or physical buyers, not additional momentum buying.
- US retail diesel prices are up 83% year to date, and gasoline is up 58% year to date.
- European natural gas prices are supported by steady storage injections and CNWE heating demand.
- Standard Chartered forecasts higher prices for crude and refined products, contingent on geopolitical resolution.
Oil prices rebounded from recent declines on Monday amid escalating tensions between the U.S. and Iran, with Brent crude for November delivery rising 1.70% to $106.09 per barrel and WTI crude up 0.95% to $93.29 per barrel. The diplomatic efforts between the two nations have yielded mixed results, marked by belligerent rhetoric from both sides.
Iranian President Masoud Pezeshkian, speaking at the United Nations, blamed the U.S. for the ongoing conflict and global instability, setting seven preconditions for dialogue, including the release of frozen funds. This followed a statement from U.S. President Donald Trump indicating he was considering military action against Iran while also suggesting a potential deal post-midterm elections. An adviser to Iran’s supreme leader, Mojtaba Khamenei, warned of potential expansion of the conflict into the Indian Ocean if Iran faces further attacks.
Experts at Standard Chartered noted that the current oil price rally is being capped by record-long positions held by Commodity Trading Advisors (CTAs), which are trend-following funds using algorithmic models. This positioning is at its maximum across Brent, WTI, and refined product markets, a configuration rarely seen in the past decade. Further price increases are now dependent on discretionary or physical buyers, rather than continued momentum trading.
Standard Chartered outlined two potential directions for crude prices: a drop driven by CTAs unwinding their crowded long positions, or a rise requiring a new physical shock, such as further infrastructure damage or a sustained cut in flows through the Strait of Hormuz. The firm stated that restoring lost Russian refining capacity, impacted by the war, would take months even if strikes ceased immediately.
US retail diesel prices have surged 83% year to date to over $6.50 per gallon, with gasoline up 58% to nearly $4.50 per gallon. CTA long positioning in these refined products is also at its maximum.
European natural gas prices also rebounded from a three-week low, trading at €74.26/MWh, as uncertainty over the Middle East situation persisted. Standard Chartered deemed a recent drop in gas prices premature, as no agreement on reopening the Strait of Hormuz has been confirmed, and European gas fundamentals remain unchanged with steady storage injections and rising heating demand.