Surmount
Automated Investing & Portfolio Tools
Crude oil has a renewed risk premium now that the US-Iran ceasefire has collapsed. Three commercial ships were attacked in the Strait of Hormuz, the US blamed Iran and struck back two days in a row, and President Trump said the ceasefire is over. The Treasury also pulled its waiver on Iranian oil sales from July 17, and Brent spiked as much as 7% toward $80. Each past crack in the ceasefire spiked oil and eventually calmed down, but nobody knows which time it won't. x.comÂ
Crude oil's supply crunch no longer depends on the conflict continuing, because the damage is already done. The IEA calls the 14 million barrels a day of disrupted supply, from attacks on regional energy infrastructure and restricted Strait of Hormuz flows, unprecedented, and warns of a supply red zone in July-August even if a deal reopens the Strait tomorrow. Damaged infrastructure does not repair overnight. @analyzedinvest adds that both peace and failed talks keep pressure on supply. 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
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
Oil stays above $80 well past the midterms because the supply problem persists despite peace headlines. Ships are still attacked near Saudi Arabia, Yemen and the UAE; a reported US strike on Iran's Konarak Naval Base ended nearly seven weeks without US strikes. There is nobody in Iran who can sign a deal and end the conflict. x.comÂ
Oil is going back up rapidly because the Iran conflict is escalating again. 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
A possible US strike on Iran poses near-term upside risk for crude oil. If Trump expects to lose the midterms, he may act between Israel's October 27 election and the November 3 US vote. Crude has filled the $101 gap and reached the rising channel's midpoint; if it keeps breaking higher, the next levels are $105, $110 and the channel top near $115. x.comÂ
The Strait of Hormuz situation looks bad for oil supply, because Iran has the leverage to keep control of it and collect tolls. Iranian drones have changed the equation despite substantial US air and naval power, there has been no uprising, and any ground invasion would take very long. Saudi Arabia and Qatar lack the naval muscle and rely on the US, and new pipelines take years, so affected countries will have to play ball for at least a few years. x.com x.com x.com x.com x.comÂ
Crude oil faces near-term pressure as Trump said US-Iran talks were productive and pledged no strikes before the November 3 elections; Brent fell to $103.36. Supply risks persist, however, with attacks on tankers near the Strait of Hormuz and 1.3 million barrels a day of Gulf of Mexico production shut in ahead of Hurricane Isaias. x.comÂ
Oil traders anticipate a resumption of the Iran war after the midterm elections, favoring more upside for crude oil. After a bullish reversal off its 10-week moving average, the odds favor a continuation of the rally to the $110-120 range. x.comÂ
