Oil Monitor: Conflict in the Soh resumes, what does this mean for oil?

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Oil Monitor: Conflict in the Soh resumes, what does this mean for oil?

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08 Jul 2026 16:07:34 ET │ 11 pages

Oil Monitor

Conflict in the SoH resumes, what does this mean for oil?

CITI'S TAKE

Maximilian J Layton AC

We had written this note initially to provide a visual explanation of the sell-off in oil +44-20-7986-4556

product prices between May and Monday of this week, with the declines occurring max.layton@citi.com

in the crude oil price component of product prices, as product premiums/crack

spreads have remained extremely high. Using some neat waterfall charts, we Eric G Lee AC

illustrate that the main drivers of the rebalancing in crude and products overall (and +1-212-723-1474

of crude oil surplus) were lower Chinese crude oil imports, recovering SoH flows and eric.g.lee@citi.com

ME diversions. The body of this note contains that information, but of course, with

the Strait potentially closing again on the escalation over the past 24-48 hours, Francesco Martoccia AC

the main questions have moved on to what happens going forward politically +39-02-8906-4571

between the US and Iran. francesco.martoccia@citi.com

Anthony Yuen ACSo what happens next? It is hard to have a base case for an endless US/Iran conflict

that impacts the SoH flows substantively, so whatever happens next, it is likely we +852-2501-2731

ultimately end up returning to negotiating/MoU/dealing. anthony.yuen@citi.com

Xiaodan Zhu ACWhen do we return to negotiations/dealing? Our base case is a swift return to

dealing over the next 1-2 weeks, but risks surrounding delays have risen. The return +1-212-816-5109

to negotiations is up to President Trump and the Iranian regime, with the latter xiaodan.zhu@citi.com