Kailash Concepts
Behavioral Finance Research, Portfolio Strategy & Quantamental Tools
Crude oil may need to reach $170 to rebalance, while markets are pricing only a short disruption. The IEA calls this the largest supply disruption in the history of the oil market, and Strait of Hormuz shipping has collapsed over 70%. The wider risk is that the Gulf relies on 56 desalination plants for 90% of its water and on imported food; both sides have struck desalination plants, and urea prices are up 20% as a quarter of nitrogen fertilizer trade transits the same chokepoint. x.comÂ
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
Oil should already be near $120 because Saudi Arabia, Europe's major oil source, is going offline for an indefinite period. Houthi strikes have repeatedly hit Aramco's facilities at Yanbu, per a report, and it is naive to think Saudi can repair the damage without being attacked again. x.comÂ
Extreme bullishness about an oil shortage is a warning because oil has tended to return to around $50 within 12-18 months after such talk. Calls for a 'great oil repricing' appeared today, though they may not be widespread enough yet to mark the same setup. x.com x.comÂ
An imminent Israeli strike on Iran puts Gulf oil infrastructure at unusually high risk over the next three months, supporting a near-term rise in crude oil. Large trades are betting on oil reaching $115 again. x.comÂ
Crude oil's safety buffer is draining at a record pace, so the next supply shock will hit a market with far less protection. The Iran war and near-closure of the Strait of Hormuz have removed over 1 billion barrels of supply, and Morgan Stanley estimates stockpiles fell about 4.8 million barrels a day from March 1 to April 25, a record. A record 400 million barrels of emergency reserves have been pledged, and inventories are near 2018 lows. Even if Hormuz reopens, restocking will add demand. … Show more
Crude oil faces a return of the glut. Per @JavierBlas, the IEA's first look at 2027 sees too much oil again by this time next year, as Hormuz is expected to reopen, though the agency warns of higher-than-normal uncertainty in its supply and demand forecasts. x.comÂ
Crude oil is set to stay more expensive for longer because the supply chain disruption from the Iran conflict is real and will not be fixed soon. Its effects are already visible in Europe and likely in Asia. Even a supply shock lasting only a few weeks would take months or quarters to reverse, feeding global inflation and possibly rate hikes. The longer the situation lasts, the more pain and the longer the repair. x.comÂ
Without a deal to open the Strait of Hormuz soon, energy inventories are weeks from bottoming, if they are not there already, which would spike oil to $150-200 and cause a deep global recession. President Trump told @nancycordes there is a draft agreement with Iran and the sides are getting a lot closer, but the Strait needs to open as soon as possible. x.comÂ
Crude oil should fall back into the $60s and likely well below over time once the Iran war is resolved. Middle East producers are overproducing but cannot export the barrels, so when the Strait fully reopens they will flood the market. Oil tried to break down from its trend line but was rejected, and bigger resolution news is likely needed to push it much lower. Cheaper oil would remove current inflation fears, setting up a deflationary boom. x.com 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
