Persistent energy premium

Moved from 2.1.7 0.72 ± 0.06 to 0.71 ± 0.06 - mean step of -0.01, giving back the Thursday reclaim-$100 step as the de-escalation re-tilted. Crude eased back below $100/bbl Friday on a leaked "final draft" US-Iran ceasefire that guarantees Strait of Hormuz navigation, reviving peace optimism. The IEA 1.78 mb/d 2026 deficit / 14.4 mb/d Hormuz-affected structural read is unchanged - the agency warned Thursday of a summer "red zone" if Hormuz stays shut - and no durable Hormuz reopening and no sustained WTI < $80 for 30 days has printed, so the invalidation SequencedCondition is no closer. The step is held to -0.01 and the band stays 0.06 because the leaked draft is unconfirmed and the diplomatic track remains live and two-sided. Beta(18.5, 7.55) ~26 effective observations, beta nudged up as the reversal partly retraces the prior structural-bid read.

Oil prices remain structurally elevated as long as the Strait of Hormuz reopening sequence is incomplete and Iranian retaliation risk is intact. The IEA May 2026 Oil Market Report forecasts a 1.78 mb/d 2026 supply deficit, world supply falling 3.9 mb/d, Hormuz-affected Gulf output 14.4 mb/d below pre-war levels; UBS expects global inventories near all-time lows by end-May. Monday May 18 cash session settled UP on the structural read - WTI June $108.66 (+3%), Brent $112.10 (+2%), XLE 60.58 (+1.92%), XOM 160.49 (+1.63%), CVX 196.12 (+2.63%). Tuesday May 19 morning the after-hours softening EXTENDED meaningfully - WTI near $103.54 (-4.7% vs Monday close, intraday range $102.16-$103.70), Brent ~$109.33 (-2.5%). The Axios overnight reporting that the White House formally rejected Iran's 14-point proposal as "insufficient" DID NOT push oil higher - the price tape is reading the rejection as opening-of-negotiation positioning rather than imminent kinetic catalyst (Tuesday strikes already cancelled, NSC meeting is deliberation not action). Structural-supply features unchanged (IEA undersupply, 14.4 mb/d Hormuz-affected, inventories near all-time lows, Persian Gulf Strait Authority tolling regime, Sunday Barakah drone strike on UAE nuclear plant); tactical softening on the diplomatic-flow side is the operative near-term variable. Tuesday May 19 the Senate advanced a war-powers resolution 50-47 against the Iran war and Trump postponed an "an hour away" Tuesday strike after Gulf-leader appeals citing oil-infrastructure retaliation fears - the diplomatic track re-opened, not closed. Energy equities held a structural bid (XOM 162.55 +1.28%, CVX 197.25 +0.58%, XLE 61.29 +1.17%) even as crude eased into Wednesday pre-market (WTI -1.9% to $102.14, Brent -2% to $109.03) - the structural-vs-tactical split the band captures. Update May 20: the de-escalation deepened materially - WTI fell ~4% below $100 on reports of ships transiting the Strait of Hormuz and talks entering final stages, and this time the energy complex sold off WITH crude rather than holding a structural bid (XOM 156.28 -3.86%, CVX 191.33 -3.00%, XLE 59.80 -2.43%). The Hormuz-transit moves toward, but is well short of, the durable reopening the invalidation SequencedCondition requires. Update May 21: the de-escalation partially reversed - crude reclaimed $100/bbl on fading optimism over a US-Iran agreement, with the Hormuz-transit and talks-final-stages momentum stalling and the IEA structural-deficit read unchanged. Update May 22: the de-escalation re-tilted - crude eased back below $100 as a leaked "final draft" ceasefire guaranteeing Strait of Hormuz navigation revived peace optimism - though the draft is unconfirmed and unimplemented and the IEA's summer "red zone" warning leaves the structural deficit read intact.