The futures curve suggests the disruption eventually eases. But with inventories being drawn, demand already adjusting and Gulf supply still constrained, the physical market may be relying on a thinner cushion than prices imply.
Originally published on LinkedIn (opens in a new tab), 3 June 2026.
Yesterday, Vitol’s Tom Baker, told an S&P Global energy conference in London that the oil market may be underpricing some of the risks around supply.
The comment is worth taking seriously because Vitol has a close view of the physical oil market, which is not just prices on a screen, but barrels, shipping, grades, insurance, refinery demand, and inventory.
What stands out is the difference between what the futures curve appears to be saying and what physical traders seem to be warning about.
Brent was trading around $95–96 on Tuesday, and the curve remains backwardated. That suggests the market is pricing a serious disruption, but one that eventually eases. That may be the right base case, but the adjustment so far does not necessarily mean the supply problem has been solved. It may mean the market is being balanced in less comfortable ways.
Some barrels have been lost through Gulf production shut-ins, some demand has weakened, including lower Chinese crude imports, and some of the gap has been covered by drawing on inventories. That can keep the market functioning for a while, but it is not the same as having spare supply.
This is the point Vitol CEO Russell Hardy made when he described the market as having “borrowed supply.” Inventories and temporary demand weakness can buy time, but they do not permanently replace lost flows.
Trafigura’s Saad Rahim made the demand side version of the same point. Demand destruction may already be happening in price sensitive consuming markets, even if that stress is not fully visible in Brent.
If Gulf flows take longer to normalize, or if China’s crude demand recovers before inventories are rebuilt, the cushion could prove thinner than the futures curve suggests. The curve may not be wrong, but it may simply be assuming that the bridge from disruption to normalization holds.
The most interestin
g question is: how strong is that bridge?
VLCC volumes fell as Hormuz disrupted traditional Gulf flows, but longer Atlantic-to-Asia voyages absorbed more vessel time. That has supported freight despite fewer barrels moving — but the effect could unwind quickly if trade routes normalise.
Iran asked ships to pay for passage through Hormuz. Now the US is proposing its own charge for providing security. The bigger concern is not the price, but the precedent: once free transit through an international strait becomes negotiable, the principle itself starts to weaken.
Oil prices are falling as the market prices a reopening of Hormuz, but tanker rates and insurance are telling a less comfortable story. Cargo is starting to move again, yet ships remain scarce and the physical system is still far from normal.