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Introduction
In early November 2026, price fluctuations occurred that violently shook the global energy and shipping markets. The U.S. WTI crude oil futures price recorded a sharp drop of approximately 15% over three business days, from $104 per barrel on October 30 to $88.1 on November 4. Although it recovered to the $90 range, reaching $90.5 on November 5 and $90.8 on November 6, it remains 12.7% lower than the October 30 level.
The decline occurred in two stages. The first wave was on November 2, before the midterm elections, when WTI fell 7.2% from $104 to $96.5. This was the day it was reported that Iran had presented a seven-step plan stating that “the Strait of Hormuz could be reopened in two days if the U.S. meets the conditions,” and President Trump stated, “The deal seems to be coming together well. I think that’s why oil prices have fallen.” Reports of the President’s intention to allow time for diplomacy after the election before deciding whether to resume attacks also triggered this decline. The second wave was on November 4, when the “blue wave,” in which the Democratic Party recaptured the majority in both the House and Senate in the U.S. midterm elections held on November 3, became a reality, causing an 8.3% drop in one day. A scenario emerged in the market where peace negotiations between the U.S. and Iran would progress, and geopolitical risks in the Middle East would rapidly recede.
The biggest driver that had pushed crude oil prices into the high range of over $100 until now was the risk of military conflict around Iran and the accompanying concerns about transit restrictions in the Strait of Hormuz. However, following the election results, speculation spread that the Trump administration might refrain from a hardline stance against Iran or resuming airstrikes, or that ceasefire talks mediated by countries like Qatar might bear fruit, leading to a sell-off of crude oil as the “war premium” that had been built up was suddenly stripped away.
This sharp drop in crude oil prices invited concentrated selling in Japanese stocks linked to crude oil and shipping. The Nikkei Stock Average also fell 9.3% from October 30 to November 6 during the same week, but this was mainly due to the collapse of AI-related stocks; the TOPIX rebounded by more than 1% on November 5 for the first time in four days, and more than 70% of stocks on the Prime Market rose. The entire market did not fall into a panic over the drop in crude oil; rather, shipping stocks, which had upwardly revised their full-year forecasts on the back of soaring freight rates, and oil refiner stocks, which were in a “record profit rush” due to inventory valuation gains from high crude oil prices, were dumped as the market priced in the “end of special demand.” However, an important question arises here. Just because the absolute level of crude oil prices has fallen, does the actual “earning power” of these companies really disappear in an instant? A huge “asymmetry” that should not be overlooked lurks between the superficial reactions of the market and the deep structure formed by actual product margins and freight rates.
Chapter 1: The “End of Special Demand” Scenario and the Reality of Panic Selling
Following the headline of a sharp drop in crude oil prices, the stock prices of related Japanese companies were hit by a fierce correction. Since the Nikkei Stock Average also fell 9.3% during the same period (October 30 to November 6), not all of the decline can be attributed to crude oil. Even so, the volatility of stock prices before and after the sharp drop in crude oil makes it clear how strong the market’s sense of caution was and how hastily it unwound positions.
The three major shipping companies all recorded declines of 12% to 15%, and the three major oil refiners recorded sharp drops of nearly 15% to 19%. The market judged that the drop in crude oil prices would directly hit the profit levels of these companies and that the “special demand” of the past few months would completely evaporate.
The market’s logic regarding shipping companies is simple and clear. With the Strait of Hormuz effectively blockaded, much of the cargo movement for LPG and petroleum products has shifted from Middle East origins to North American origins, increasing the transport distance per voyage and tightening the supply and demand for vessel space. The inference is that if transit restrictions in the strait are eased, this distance effect will be eliminated at once, and tanker freight rates, which have been at historically high levels, will normalize. On the other hand, for oil refiners, concerns about the massive “inventory valuation gains” that had accumulated during the rise in crude oil prices being stripped away, and the potential for recording large-scale inventory valuation losses instead, pushed down stock prices.
However, does this across-the-board decline in stock prices mean an “actual deterioration” for all related companies? If you only follow the superficial trends in crude oil prices, there is a danger of overlooking the dramatic changes occurring in the depths of the industrial structure.
Chapter 2: “Backwardation” and “Abnormal Margins” Lurking Behind the Price Plunge
If you look only at the fact that the absolute level of crude oil prices plunged by 15% at one point (closing at $88.1 on November 4) and is still 12.7% lower on November 6 compared to October 30, it appears as if the supply anxiety in the Middle East has been completely resolved and the market has regained calm. However, when you scrutinize the price structure of the futures market (the forward curve), a completely different picture emerges.
Let’s check the WTI crude oil futures curve as of the close on November 6.
Compared to the near-term (December 2026 contract) at $90.83, the one-year forward (December 2027 contract) is at $75.58, a level more than $15 lower. This state where the near-term is high and the long-term is low is called “backwardation.” This is a typical sign indicating a tightening of current supply and demand, where physical goods are needed immediately rather than holding inventory in the expectation that future prices will fall. This near-term to one-year forward spread has shrunk by about 30% from $22.2 on October 30 to $15.2 on November 6, and the curve has indeed flattened. Even so, a $15-scale backwardation remains, and according to U.S. statistics from late October, commercial crude oil inventories remain at about 410 million barrels after a weekly draw of 1.9 million barrels, a level that is not oversupplied but not critically tight either. This means that even if the absolute level of crude oil prices has fallen by more than 10%, the actual supply and demand for physical goods has not loosened.
Even more important is the margin of “petroleum products” refined from crude oil. Let’s look at the trend of the “crack spread,” which indicates the actual gross profit when crude oil is purchased and diesel or gasoline is manufactured.
The diesel crack (vs. WTI) was $97.2 as of October 30 before the crude oil plunge, and even after the crude oil crash, it remained at $91.1 as of November 6, maintaining a historically high level. This is an indicator that usually fluctuates between $15 and $30 in normal times, and the current level indicates that an “abnormal situation” is continuing where diesel demand is not being met even when refining facilities are operating at their limit. The background to this is a structure where the supply capacity of “refined products,” rather than crude oil itself, is being damaged globally, such as the decline in Russia’s refining capacity due to Ukrainian drone attacks and attacks on oil refineries in Saudi Arabia.
The market simplified the situation by selling stocks, assuming that ‘if crude oil prices fall, the profits of oil wholesalers will vanish,’ but the situation differs when looking at individual products. Diesel remained almost flat against Brent, moving from $83.2 on October 30 to $83.6 on November 6, and saw only a slight decline against WTI, from $97.2 to $91.1. Meanwhile, the gasoline crack (against WTI) fell by 26%, from $35.0 to $26.0. The fact that diesel margins were maintained while Brent fell by $19.7 during the same period highlights the gap between the surface of this news and the deeper fundamentals.
In the paid section that follows, I will break down the financial results of Japan’s three major oil wholesalers by inventory impact to reveal the accounting mechanism behind their massive profits. Furthermore, I will explain why tanker freight rates in the shipping market do not fall uniformly by analyzing them by route and vessel type, focusing on the transit risks of the Strait of Hormuz and the unique cost structure of ‘war risk premiums,’ and I will track the strategies of overseas shipowners who are locking in these abnormally high prices through time charter contracts. Finally, I have included five appendices at the end summarizing the one-year trend of crude oil prices, earnings forecast revisions for the three major shipping companies, the VLCC earnings ladder, and the financial indicators of eight Japanese stocks and six overseas tanker companies.
