Jeff Kilburg
Founder, CEO & CIO of KKM Financial, Contributor to CNBC
Crude oil longs look weak precisely because calls for Brent above $150 and US crude above $120 keep multiplying. A Strait of Hormuz fully reopened through multi-country efforts would bring massive short-term relief to oil prices, and a Washington press conference timed just after sunset in Iran is worth watching for that. x.com x.comÂ
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
More oil passing through the Strait of Hormuz and continued OPEC and Russian production should push crude oil lower. It has fallen from about $106 to $96 over the past month. x.comÂ
Crude oil is hard to push lower even if Trump backs off, because Iran now effectively controls the Bab el-Mandeb strait on top of the Strait of Hormuz. x.comÂ
Plummeting base costs and weaker demand from struggling economies abroad should push crude oil lower next year. The same forces will also weigh on many other commodities and services. x.comÂ
The oil trade is over because crude can no longer make higher highs, even with Middle East crude exports back near their peaks. Oil is trading around its average price of the last eight months and set a lower high in September, so it is only a matter of time before the market gives up. Crude looks about to fall through the floor, with rates following and high-beta stocks then going vertical as every dip gets bought. x.com x.com 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 wants lower. The Kobeissi Letter reports US oil down more than 5% toward $92 a barrel as markets react to a potential US-Iran peace deal. x.comÂ
Crude oil looks set to fall as Persian Gulf exports recover. Per The Kobeissi Letter, Gulf crude exports topped 14 million barrels per day last week for the first time since the Iran War began on February 28, up over 210% from the March low and back to about 80% of pre-war levels, as the US military secures the Strait of Hormuz with a shipping corridor along Oman. If that holds true, the bearish oil view pays off. x.comÂ
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
Oil's slide from $120 during the war to $79 should continue as the US-Iran deal, due to be signed on the 19th in Switzerland, reopens the Strait of Hormuz and ends the US naval blockade, restoring choked supply. Cheaper oil lowers US inflation and flips the market from expecting another hike toward rate cuts, lifting risk assets. The deal is only a 60-day MOU, though, and Israel is the problem: if anything blows up, oil rips and the chain runs in reverse. x.comÂ