dailyloe.com – U.S. crude oil futures for May delivery surged Thursday, creating the largest price gap ever recorded between monthly contracts. This historic event followed President Donald Trump’s national address on the ongoing war with Iran. The market reacted strongly to the prospect of a prolonged military conflict.
West Texas Intermediate for May delivery closed at $111.54 per barrel. This was more than $13 above the June contract price of $98.04. The spread between these two months is the biggest since records began in 1983.
Prices had fallen slightly the previous day ahead of Trump’s speech. They began rising during the address as hopes for a quick ceasefire faded. Bob McNally, president of Rapidan Energy, analyzed the market’s reaction.
McNally stated that Trump’s prior suggestions of a quick end had depressed prices. The market believed the conflict nightmare could not continue indefinitely. The speech changed that perception, triggering a bullish rally.
McNally suggested many traders had bet on a ceasefire declaration. These short positions were forced to cover after the speech. This activity contributed to the sharp rise in the May contract.
Meanwhile, the spot price for physical Brent crude cargoes also soared. It reached $141.36, its highest level since the 2008 financial crisis. S&P Global, which tracks this data, reported the surge.
The spot price reflects demand for oil delivered within 10 to 30 days. Its sharp increase indicates extreme tightness in immediate physical supply. This shortage is largely due to Iran’s closure of the Strait of Hormuz.
The strait is a critical chokepoint for global oil shipments. Its closure represents a massive disruption to supply chains. Traders are now pricing in a sustained period of market tension and uncertainty.[]
Source: CNBC
