Matthew Tuttle
CEO & CIO of Tuttle Capital Management, Publisher of Daily H.E.A.T.
Crude oil faces a structural repricing of energy risk, not a one-week spike, as both Saudi export routes are compromised at once. Drone strikes took out Petroline, the Hormuz bypass pipeline moving about 4 million barrels a day, while the Houthis seized Perim Island in the Bab el-Mandeb strait and Saudi output sits at a 30-year low. Brent rose 8.7% to $104.61 as the Fed hiked into it. Barrels stuck behind a strait are worth zero, favoring producers that avoid chokepoints. x.comÂ
Brent at $80-100 is now a structural floor rather than a risk premium, because global oil inventories are falling into a closed Strait of Hormuz. Per @spencekimball, stockpiles fell from 8B barrels in February to 7.8B by end of April, and UBS sees record lows of 7.6B by end of May if Hormuz stays closed. Wall Street still underprices this inventory data; the oil trade is no longer about OPEC noise or Iran headlines. x.comÂ
Daily attacks on Saudi energy installations, seemingly at will, are a bigger driver of oil's rise than Hormuz. If they escalate and meaningfully damage Saudi production, $200 oil isn't impossible. x.comÂ
All three routes for Middle East oil out of the war zone shut within 72 hours, and the Fed cannot fix that. Strait of Hormuz traffic fell from over 130 ships a day before the war to 31, then zero. Iraqi drones hit pump stations on the Saudi East-West pipeline, leaving Riyadh five to seven days of crude stored at its end. In the Red Sea, a militia seized Mokha, Perim and the Hanish Islands and bars Saudi ships. Iran only needs to wait: America votes in 49 days, Iran not until 2028. x.com x.com … Show more
Crude oil's latest drop reflects real Gulf export capacity coming back, which erodes Iran's Hormuz leverage. Saudi Arabia resumed loadings at Yanbu, with the East-West Pipeline at 2-2.65m barrels a day and seen by Kpler rising to 3-4m soon. Saudi and UAE shuttle tankers under US escort have restored at least 60% of pre-war flows. The risk: Qatar's mediation is stuck, per Axios, and a squeezed Iran may escalate against ports, refineries, pipelines or Red Sea shipping. x.comÂ
Yemeni attacks on Riyadh add to the geopolitical risk behind crude oil's rise. Oil is starting to go parabolic. x.comÂ
Crude oil is going through a real-time supply-chain repricing, not just a headline scare. Crossings are at zero, Brent is at $100, Aramco is rerouting to Sidi Kerir, and diversions around the Cape of Good Hope add weeks to delivery. x.comÂ
Crude oil's geopolitical risk premium is bleeding out as Saudi Arabia's East-West Pipeline reopens. Piping crude straight to the Red Sea bypasses the Strait of Hormuz and vulnerable Gulf shipping lanes, removing a major supply bottleneck. That recovery erases the premium added after the September 10 attacks and stabilizes energy flows when macro markets needed it most. x.comÂ
Crude oil looks set to rise sharply in the short term as Saudi supply disruptions worsen. Per @KobeissiLetter, citing Reuters, Saudi Arabia suspended loadings at Yanbu, its main Red Sea port exporting up to 5 million barrels a day, after attacks on its East-West pipeline, with Brent near $110. Per @HormuzLetter, Saudi Aramco cancelled its September European allocations, with no Saudi cargoes to Europe until November. The big move likely comes within the next couple of days. x.com x.com x.com … Show more
Crude oil's last cushion is gone as recovering demand squeezes constrained Middle East supply. Barclays puts China imports near pre-war levels at 10.5m b/d, India up 600,000 b/d year on year and Middle East flows at 84% of pre-war levels; US demand is recovering. After more than 500m barrels of inventory were drawn down, buyers are paying a $13/bbl premium for next-week cargoes over the front-month contract, versus under $4 a week into the war. x.comÂ
Sustained high energy prices strain US farming, logistics, manufacturing and consumers, so crude oil should fall dramatically from its elevated level. Middle East and Russia tensions are lifting WTI, shown near $103, while Trump will likely step in at some point to reduce uncertainty. x.com x.comÂ
Oil now matters more for markets because the Fed is considering oil in its reaction function, no longer looking through supply shocks. Once the Fed reacts to oil, yields react to oil. x.comÂ
