Citadel: Trump's Tweets Have Upended the 'Crude Oil Trading Paradigm'

Since the outbreak of conflict in the Middle East, Donald Trump's frequent posts on social media have fundamentally altered the way crude oil is traded, leaving traders exhausted.

On April 20, Sebastian Barrack, head of Citadel's commodities business, stated at the Global Commodities Summit that at the initial stage of the Middle East conflict, volatility in oil and gas markets surged by approximately 300%. He revealed that he has specifically set up a screen to monitor Trump's social media activity in real time.

Barrack added that previous energy crises were primarily driven by traders striving to track "physical flows," whereas market participants now must simultaneously monitor "social media feeds" including those from Trump. He said:

You must understand that the market is fluctuating based on this information.

At the same time, Barrack reminded traders to remain vigilant about the reality that "these messages may not be fully thought through." As mentioned by Wallstreetcn, JPMorgan crude oil analyst Natasha Kaneva believes that although crude prices are currently falling, fundamentals have "improved in no way."

In early March, conflict between the US and Iran caused a sharp decline in shipping traffic through the Strait of Hormuz, sending oil prices soaring to nearly $120 per barrel. Since then, with every statement made by Trump, the market has repeatedly priced in violent fluctuations.

On March 23, he posted on social media claiming negotiations with Iran were "productive," triggering a sharp drop in oil prices; earlier, when he stated that the war was "basically over," it similarly caused massive selling in the energy market.

Pre-war Pricing Errors Led to "Deep Research Mode" After Conflict Erupted

Barrack admitted that oil and gas traders significantly underestimated the risk assessment of major market dislocations caused by the Middle East conflict prior to the war.

He stated that this conflict was "a well-warned potential risk," with a probability of occurring at some point this year estimated at 50% to 70%, yet the market did not fully price this in.

He pointed out that before the war broke out, it was difficult for Citadel to find trading directions with an informational advantage, despite the firm having bet on rising prices for petroleum "distillates" (including diesel, jet fuel, and heating oil). Barrack said:

Frankly speaking, unless you are inside the Trump administration, there is almost no true informational advantage; this resembles a low-tech gambling environment where the market's pricing of these probabilities is already quite sufficient.

With the outbreak of conflict, Barrack stated that his team quickly entered "deep research mode," establishing a comprehensive model covering global regional impacts on energy supply and demand to capture trading opportunities. He said:

These opportunities open and close extremely fast because the market reacts very sensitively.

Barrack gave a positive evaluation of the communication and collaboration between the Trump administration and industry traders. He stated that the Trump administration "has done an excellent job in understanding the market and maintaining contact with relevant industry figures," possessing a deep grasp of market mechanisms.

However, he simultaneously criticized the White House for being overly confident in its ability to suppress oil prices, including measures such as releasing strategic petroleum reserves, providing escorts for ships transiting the Strait of Hormuz, and underwriting marine insurance. He said:

These plans were somewhat insufficiently considered.

JPMorgan: Price Decline is an Illusion; Fundamentals Remain Unchanged

On April 19, JPMorgan stated in its latest research report that recent spot crude oil prices saw a counter-intuitive sharp decline, primarily triggered by Trump's statements indicating a de-escalation of the situation, but the bank's chief commodities strategist Natasha Kaneva stated directly:

Structurally, there has been no improvement in fundamentals whatsoever.

Iran's exports of approximately 2 million barrels per day have essentially dropped to zero following the implementation of Trump's blockade measures, and the previous supply gap of approximately 14 million barrels per day may have further widened to a range of 15 to 16 million barrels per day.

JPMorgan believes that under the dual background of tightening supply and rapid inventory drawdown, oil prices should be rising; the only reasonable explanation for the current downward price trend is one: demand is being destroyed.

JPMorgan believes that the current market supply-demand balance relies on rapid inventory drawdown and forced production cuts by refineries.

As OECD crude oil inventories approach operational minimums around May 15, the pressure on refineries to cut production further will intensify significantly, and the fundamental crisis facing the crude oil market could trigger even more volatile price swings.