Market expectations are tilting back towards a more prolonged conflict after the US rejected Iran's response. Every day that passes means more barrels lost. A fragile ceasefire is in place but being tested. De-escalation channels remain open, but a trust-building first step is needed before complex issues like nuclear facilities can be negotiated.

Brent has found an uneasy equilibrium between $100-105; its reaction to headlines has been dampened. Physical cargo premiums are easing, but this is likely temporary as buyers have been holding off. Once purchases can no longer be deferred, we will see a return to higher prices for physical cargoes.

US exports have increased sharply; Brazil has improved exports; China has reduced imports. But these are temporary adjustments.

Product inventories remain surprisingly good; US jet fuel inventories are above seasonal averages. But if we assume a billion barrels of supply have been taken off the market, inventories cannot remain this strong for long.

All eyes on the meeting; Trump is expected to press Xi on Iran. The US Treasury is expanding sanctions on Iranian crude buyers, potentially forcing them out of the market. This would tighten the sour crude market, with Russian Urals as the most obvious substitute. Chinese teapot refineries may have to reduce runs if feedstocks or financing are restricted.

Diesel cracks have been the highest price movers since the start of the conflict. Diesel is integral to the entire economic complex (vehicles, transportation, logistics). High prices will adjust behavior, and we expect to see adjustments in consumption over the next couple of months.