Yes, front-month prices surged in March-April but prices for the later months showed only modest increases from pre-war levels. Chart 1 shows a snapshot of Brent crude futures price curves over the last few months. Critically, the entire futures curve collapsed downwards in May and further in June. The oil futures market is in effect telling us that the current disruption is a logistics issue, it will not last and, importantly, there is no oil shortage.
Since the start of the US-Israel-Iran war, we have been inundated with near-daily predictions of an imminent energy catastrophe by news commentators, analysts and experts alike — pointing to the loss of critical oil supply passing through the Strait of Hormuz, which carries roughly 20% of global oil flows. Sensationalism sells. Many politicians, too, have been quick to lay the blame of (pre-existing) rising cost of living and affordability issues on the crisis.
Yet, through it all, the oil futures market’s reaction has been surprisingly tempered.
