Oil Price Outlook: Brent-WTI Spread Faces Seasonal Whipsaw as Supply Risks Build

In this report: I look at the most high impact seasonal trades across crude markets as we stare into a DEFCON 1 situation for crude markets.

Iran’s Parliament Speaker Mohammad Bagher Ghalibaf has reiterated Tehran’s stance on the Strait of Hormuz saying the critical waterway will remain closed until the United States fulfils its signed commitments.- Al Jazeera news

Middle East energy shipping chokepoints, including the Suez Canal, Strait of Hormuz and Bab al-Mandeb. Source: Al Jazeera / Congressional Research Service / MarineTraffic.

Oil Supply Shock Sends the Brent-WTI Spread Higher

Global energy markets have been rocked in the past 10 days. Houthi attacks on the Saudi Petroline, Sept 10th, have effectively knocked another 5% (5mbd) off already shaken global crude supplies. With levels of Hormuz oil transits rising in earnest, markets were underpriced for this risk, seeing global benchmarks such as Brent rise+$8. With a touted 6 weeks fix timeline to regain 50% of pipe flows, markets are already anticipating a resolution to the outage, with the Brent premium over WTI already pairing back rapidly. This ‘pricing out’ of the risk is translating into about a $4 pullback in Brent Wednesday through Friday pre-market trade.

Brent-WTI spread reacts to the Saudi Petroline disruption. Source: TradingView.

There is significant doubt whether Petroline repairs can actually be delivered within a 6-week timeline, with experienced field operators from that part of the world speaking about a 3-month period as more realistic. Already workaround flows have resumed on the Petroline at a greatly reduced flow capacity. When fixed, The Saudis will have to vastly increase security. It remains to be seen if Trump will do anything about it, while The Saudi buys 48 more F-35 fighters (yet to get congressional approval). They are going to need them.

Brent crude price action following the Saudi Petroline disruption. Source: TradingView.

Strait of Hormuz Oil Flows Recover as STS Transfers Expand

Ship-to-ship transfer routes east of the Strait of Hormuz, including Sohar and Fujairah.

Hormuz flows are modestly bouncing (currently 8mbd-9.5mbd Kpler & Tankertrackers), aided by STS and Shuttle transfers. ‘Shuttle vessels’ pickup oil at The Omani port of Sohar- East of Hormuz and another closer to Fujairah. This oil either transfers to a nearby ship and transfers the cargo to go for final leg delivery, or it makes a much longer journey to India or Malaysia to transfer ships there for final leg delivery.

Shuttle tanker activity and STS operations east of the Strait of Hormuz. Source: Vortexa.

Daily outbound crude transits through the Strait of Hormuz, including STS and shuttle movements. Source: @LVision_Trading.

You can see where day rates on ships here become a major cost factor. Some freight rates at the moment are adding as much as $20 to the cost of a single barrel of its cargo.

Rising Freight Rates Add to Global Inflation Risks

Tell me there is inflation coming without telling me there is inflation coming! More in the net net below.

One-year time-charter rates for crude tankers by vessel class. Source: Fearnleys.

One-year time-charter rates for dry-bulk vessels by vessel class. Source: Fearnleys.

Refinery Outages Tighten Diesel and Fuel Supply

A week ago Trump asked Zelensky to stop hitting Russian energy targets. Zelensky responded by hitting 5 key Russian refiners, knocking out almost half a million barrels. In the last 3 months, we have lost about 3mb/d of refining.

Estimated refinery outages across Russia and Gulf countries. Source: The Oil Report.

Energy Shock Revives Inflation Risks Across Commodity Markets

A perfect energy led storm has set in over the skies. The inflation we have seen in the post COVID phase, came and went and from this vantage point, was finally ‘transitory’. Damaged and tighter energy flows now reverberate across commodity markets. Now the Houthi attacks and the reality of war are set to wake inflation again. The oil and dry bulk shipping rates are singing a canary song. A bout of 70s style inflation seems comically unavoidable.

Comparison of the recent inflation path with U.S. inflation during the 1970s.

U.S. and European pump prices during the Iran war. Source: The Oil Report.

The adults in the room, the likes of Mark Carney, Jeffrey Sachs, Rick Santelli, Ray Dalio and Jeff Currie, all hold a common thesis centrepoint. Energy shock, migration, soft borders, higher rates and deglobalisation are leading to regime shifts where more focus on national commodity resources is required. Where is the ‘safe’ molecule?

An acute pressure on this changing picture is consumer energy costs. If crude oil is the storm, diesel and gasoline prices are the lightning bolts. Just have a look at the truth of that particular situation as below.

Diesel futures have outpaced crude oil prices in 2026. Source: Bloomberg / American Petroleum Institute.

Seaborne diesel exports from Russia, Middle East countries and China in 2025-2026. Source: Vortexa / American Petroleum Institute.

Gold and Agricultural Commodities Move Into Focus

So to step back, what’s the trade? Since spring 2025, we have started to see the AI trade price in aggressively and become almost 40% of US equity gains. Central banks saw a form of overheating and decided to plough into the safety of gold. That trade is a complexity in its own right and I suggest following Vance over at VBL Gold for more. An essential read!

But this is an ags trade through and through-Wheat, corn, soybean, soymeal etc. We have already seen inflections on all the major ags products as we suspected 3 months ago. So this is a case that I would like to see them get washed out through to the spring 2027 period, then see a rerally for newer highs.

CFTC Oil Positioning Shows Crowded WTI Shorts

Incredible scenes for OR shorts on WTI, where they pushed their shorts to 100% crowded on the 2yr look back +18.8% WOW increase. I sincerely hope they took profits through the rest of the week.

Looking at the combined report, we see that MM net increased +14k contracts, long and short sides. I expect MM to ride the longs this week. Tension is building in the positioning, with Swap dealers at 83% crowded short into this move.

CFTC Commitment of Traders positioning for WTI crude oil. Source: CFTC data / The Oil Report.

Brent Oil Trade Setup: Seasonal Whipsaw Window Comes Into Focus

Make no mistake, this is now a DEFCON 1 situation for oil and commodities. Talking with some farmers recently, we are seeing a massive fear for 2027 fertiliser prices. A lot of farmers have not bought forward for the 20207 season as they simply didnt have the cashflow. I am not hearing yet of strong or material government intervention in the matter either. I fear it will be too little too late for small to medium farmers when we get to 2027 planting season.

Brent crude technical setup with resistance and support zones ahead of the seasonal trade window. Source: TradingView.

But what is the trade? Higher! That’s all I have to say about front month crude BRENT, rather than WTI, as we are looking at that spread widening significantly further in this coming week. The falsifier to this is that the Iranian government come back to the talking table and halt further regional attacks IN TANDEM with the Houthis falling in line with same. Talk of this will bring in some downside, but this war has the form that Trump and co, will say its happening to contain upside, then Iran will dispel it all as bullshit.

Brent crude chart highlighting the Saudi Petroline strike and key technical zones. Source: TradingView.

Brent Dec 2026/June 2027 Spread Approaches a Seasonal Inflection

For practical trades, we have been looking at the Dec/April or even the Dec/June spreads. I’ll focus on just the Dec26/June27 one here below. Lord Apollo in the discord was happy to point out this as a slightly better play than April. Liquidity will be a bit better. Here is what it currently looks like. We are not positioned on this. With entry planned for approx Sept 30th.

Brent Dec 2026/June 2027 calendar spread and rising channel. Source: TradingView.

Here below is a screenshot from my personal seasonal system. I have the shorts filter layer turned on. This alerts me to where the max return shorts are on any particular calendar pair. The orange line is this years Dec/June price action (Ice Brent data I pay for). The blue line is how this spread has traded for 15 years. I have the option to look back 5,15 and 30years. You can see that we are expecting a seasonal inflection point on Sept 30th.

I must state that this is not trading or investment advice. This is for informational and learning purposes. We discussed this trade on Brent and WTI in the Oil Report discord last Friday. Below, I’ll look at the WTI spread as my brent system is acting up at the moment.

Brent Dec/June spread: 2026 price action versus the 15-year seasonal pattern. Source: The Oil Report seasonal system.

30-Year Brent Spread Seasonality Reinforces the Whipsaw Window

Brent Dec/June spread: 2026 price action versus the 30-year seasonal pattern. Source: The Oil Report seasonal system.

And most importantly, the 5year. Note that here, we expect an initial bout of selling to come in, with a massive blow top inflection in October. I can discuss exact date with the subs whop are in the discord.

Brent Dec/June spread: 2026 price action versus the five-year seasonal pattern. Source: The Oil Report seasonal system.

In speaking with another trade desk on Sunday, I was explaining that we are in what I call the seasonal ‘whipsaw window’. Now you can see why. We have to be alert through this window when trading oil. I remember in 2023 when we had our second baby and I was living on very low amounts of sleep as we came into this window. I had 3hours sleep when I got my system signal to sell on the pitt settle. Needless to say, I completely fumbled the ball and trade management, missing out on a massive downside move. So when I say, we have to be ready and alert, this is what I mean.

Brent Dec/June spread: 2023 price action versus the seasonal pattern. Source: The Oil Report seasonal system.

Ok folks.

That’s the report. Best of luck out there!