How a new Khamenei in Iran convulsed oil market in London

crude oil was trading at a $6.86 per barrel discount to the May contract of $104.53 at the time of writing. On 27 February, a day before the war began, it was just the opposite: the June contract was at a slight premium of 39 cents to the May contract, which quoted at $72.48, as per Bloomberg.Such flipping of discounts between near and far months—backwardation or inversion in technical parlance—points to supply disruptions due to the West Asia war.

The May and June contracts are currently the most actively traded oil futures contracts on ICE Europe. In a normal market with ample supplies, the far-month futures trade at a premium to the near-month contract, as the former takes into account storage and insurance charges."The steep discount on ICE clearly indicates the supply distress due to the effective closure of Hormuz," said Sudhir Joshi, former director- finance of Bharat Petroleum Corp.

Ltd (BPCL), who is credited with setting up the state-owned refiner's oil trading desk in the early 2000s. Joshi explained that the market tends to move into discount amid sharp supply disruptions.

At such times, far-month futures trade at a discount to the near month, which tends to trade closer to the spot price.Brent crude shot past the $100 mark overnight after Iran chose Mojtaba Khamenei as Supreme Leader to succeed his slain father Ayatollah Ali Khamenei, raising the chances of a protracted conflict. The US has described the selection as "unacceptable," while Israel has labelled him an "unequivocal target for elimination." A dragged-out war threatens to keep oil supply chains blocked for longer, boosting futures prices.After soaring 29% to approach a four-year-high of $119.50 earlier in the day, oil slipped to $104.53, after the