Oil Prices Defy Physical Market Warning Signs

KUALA LUMPUR, 29 JULY 2026 —

Oil prices have remained relatively stable since March, despite severe disruptions to Middle Eastern supply, according to OilPrice.com. Many commentators have been puzzled by this, with futures prices failing to surge as expected, says Irina Slav for OilPrice.com.

The reason for this stability appears to be optimism and a bet on market adaptability, with many drawing comparisons to 2022, when Russian oil flows continued despite Western sanctions, as reported by OilPrice.com. However, adaptability has limits, and warning signs are now flashing, particularly in oil products, with crack spreads at all-time highs, according to Clyde Russell of Reuters.

The current situation is more severe than the 2022 Russian disruption, with Iran closing the Strait of Hormuz and oil infrastructure being targeted by drone and missile strikes, as noted by OilPrice.com. Despite this, Saudi Arabia and the UAE have managed to redirect oil flows, and Iraq is considering doing the same, which has helped to keep a cap on futures prices, says OilPrice.com.

However, global oil inventories are being drawn down, with the U.S. Strategic Petroleum Reserve nearing a critical level, according to OilPrice.com. Gasoline, diesel, and jet fuel supply is also tightening, as demand outpaces supply, suggesting that the disruption in Middle Eastern energy exports has been severe enough to warrant a closer look, as reported by OilPrice.com.

The Malaysian market may be impacted by these developments, as the country is a significant importer of oil and petroleum products, with the Ministry of International Trade and Industry stating that the country's oil imports totaled RM45 billion in 2022.

As the situation continues to unfold, it is likely that oil prices will become increasingly volatile, with some analysts warning that if the war extends beyond June, all bets will be off, with global crude inventories depleted and shortages emerging in fuels, as reported by OilPrice.com.