The oil market is trading lower at the start of the week, with signs of a deal between the US and Iran increasing
Energy – US Drilling Activity Jumps
The oil market sold off in early morning trading in Asia, with down around 5% at the time of writing and trading back below $100/bbl. This comes as President Trump suggested over the weekend that progress has been made on a deal to end the war and reopen the Strait of Hormuz. We’ve been at this stage before, only for talks to break down. Therefore, the market will likely be more cautious about overreacting to these headlines. There also appears to have been some tempering of optimism. Trump has since said he’s in no “rush” for a deal and that it “isn’t even fully negotiated yet”. The US suggests that any final deal could take several days. Meanwhile, local Iranian media claims that the US is still blocking some key Iranian demands. Obviously, the big unknown is how the US and Iran will resolve their differences on Iran’s nuclear programme.
While talks continue, vessels are still trickling through the Strait of Hormuz. A crude tanker and an LNG carrier recently navigated the strait. Iran, meanwhile, claims 33 vessels moved through the strait in a 24-hour window over the weekend after obtaining approval. This includes all commercial vessels, not just tankers.
The latest positioning data shows that speculators reduced their net long in ICE Brent by 10,517 lots over the last reporting week, to 335,288 lots as of last Tuesday. The move was dominated by fresh shorts entering the market. This suggests growing optimism, or at least hope, for an imminent deal between the US and Iran.
There were further signs of US producers responding to the higher price environment. Baker Hughes data shows that the US oil rig count increased by 10 over the last week to 425. This is the largest weekly increase in the number of active oil rigs since February 2023. It leaves the rig count at its highest level since July 2025. Meanwhile, Primary Vision’s frac spread count jumped over the week, highlighting a continued pick-up in completion activity. The US has been exporting record volumes of oil since the war, as buyers seek alternative supplies. However, much of this increase in export volumes has been met by inventory drawdowns rather than by supply growth.
European prices are also under renewed pressure amid the progress in talks between the US and Iran. TTF is trading 6% lower at the time of writing, with prices back below EUR46/MWh. The move lower in TTF is unlikely to help the European market attract LNG, with the JKM-TTF spread widening. EU gas storage is close to 38% full, well below the 5-year average of 52% full.
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