40+ years in markets informs me that the 'right' price for oil is the price on the screen. market signals simply cannot be ignored. it can be no surprise that the recent stories of 7mm bpd more than expected have been flowing out of the Strait given the fact that oil's price simply has shown no inclination to rise dramatically. your point about Vitol et al profiting hugely from any dislocation is exactly correct, and in so doing they help drive the known price.
I think the other thing that is happening is not only is the US producing more, but so is Canada, Guyana, Venezuela, Brazil and even Argentina. at $90/bbl or $80/bbl, drillers gonna drill.
Ships carrying Iranian oil are likely to go 'dark' to evade the US semi-blockade. Its very difficult to be sure of origin.
There is a lot made of the apparent fall in Chinese imports, which some are tying to draw down of their ample reserves and others to economic output reduction. I have seen no reliable evidence of either. I doubt anyone in the West has a real handle on Chinese imports and what it is getting from Russia.
The 'green bird' is a strong advocate of US exceptionalism along with one or two other analysts on substack. Currently I take their conclusions that the Hormuz situation is a nothing burger with a packet of salt. And as I have commented elsewhere, it may apply to the US but not to Europe or Asia.
Oil price discovery, I think, will be fast and brutal in the weeks to come when physical oil is simply not there — since gradual price discovery was made impossible by the current US administration with 38 or so fake statements "peace is around the corner" and aggressive SPR releases. This is not meant to be partisan, but merely a description of reality. The prior administration had used up a good chunk of the SPR oil reserve to limit the impact of sanctioning Russia.
Currently, Washington tries to postpone the pain, but microeconomics 101 tells you: if you have less supply, your only choices are gradually higher prices or (if you monkey around with it) delayed, explosive higher prices. An EVP of Exxon and the CEO of Chevron were recently in the news ringing the alarm bells.
For countries with oil production, it will mean much higher prices. For countries that rely mainly on imports, that will mean much higher prices and supply shortages. The richer countries, of course, will outbid the poorer countries.
Years ago, when I had my first microeconomics course, all the supply and demand graphs seemed a bit theoretical. It feels very practical now.
It will be definitely interesting to see how this turns out. Working thesis on Exxon and Chevron ringing the alarm: they want prices to go up but not too much for demand destruction to occur. If there is indeed a full-blown price spike around the corner, they might be careful not to fan the flames.
“While this is not direct proof of PGSA-linked flows, it indicates that capital will find ways to monetise an informational advantage of this scale, inside or outside Western settlement systems.”
Guess we'll find out by July who has their theory reflected in reality ("operational minimum").
That May 5th intelligence report shows that "Wall of Steel" naval blockade sure seems full of holes, no AIS will still mean they likely paid off IRGC (and the payment flows would confirm that).
We might see repricing in the European space at least with divergence widening. Someone's going to come out positioned worse once this works itself out - my bet is on many European countries, maybe France and Spain can circumvent due to their own exploration, maybe Italy (but didn't sound like they can).
Just thinking out loud.
If Hormuz is to become an official instead of unofficial toll booth, as is my guess and would be logical to ask for in the MoU, there's not going to be cheaper oil & gas from there by sea anyway after an MoU outside of less demand and same production levels. Then there's still the matter of "will Iran cease nuclear programs" in a satisfactory way - we need to remember that is the official reason the US went there in the first place.
40+ years in markets informs me that the 'right' price for oil is the price on the screen. market signals simply cannot be ignored. it can be no surprise that the recent stories of 7mm bpd more than expected have been flowing out of the Strait given the fact that oil's price simply has shown no inclination to rise dramatically. your point about Vitol et al profiting hugely from any dislocation is exactly correct, and in so doing they help drive the known price.
I think the other thing that is happening is not only is the US producing more, but so is Canada, Guyana, Venezuela, Brazil and even Argentina. at $90/bbl or $80/bbl, drillers gonna drill.
Right on both counts.
Ships carrying Iranian oil are likely to go 'dark' to evade the US semi-blockade. Its very difficult to be sure of origin.
There is a lot made of the apparent fall in Chinese imports, which some are tying to draw down of their ample reserves and others to economic output reduction. I have seen no reliable evidence of either. I doubt anyone in the West has a real handle on Chinese imports and what it is getting from Russia.
The 'green bird' is a strong advocate of US exceptionalism along with one or two other analysts on substack. Currently I take their conclusions that the Hormuz situation is a nothing burger with a packet of salt. And as I have commented elsewhere, it may apply to the US but not to Europe or Asia.
Worthwhile insights. Thank you!
Thanks for reading!
Oil price discovery, I think, will be fast and brutal in the weeks to come when physical oil is simply not there — since gradual price discovery was made impossible by the current US administration with 38 or so fake statements "peace is around the corner" and aggressive SPR releases. This is not meant to be partisan, but merely a description of reality. The prior administration had used up a good chunk of the SPR oil reserve to limit the impact of sanctioning Russia.
Currently, Washington tries to postpone the pain, but microeconomics 101 tells you: if you have less supply, your only choices are gradually higher prices or (if you monkey around with it) delayed, explosive higher prices. An EVP of Exxon and the CEO of Chevron were recently in the news ringing the alarm bells.
For countries with oil production, it will mean much higher prices. For countries that rely mainly on imports, that will mean much higher prices and supply shortages. The richer countries, of course, will outbid the poorer countries.
Years ago, when I had my first microeconomics course, all the supply and demand graphs seemed a bit theoretical. It feels very practical now.
It will be definitely interesting to see how this turns out. Working thesis on Exxon and Chevron ringing the alarm: they want prices to go up but not too much for demand destruction to occur. If there is indeed a full-blown price spike around the corner, they might be careful not to fan the flames.
“While this is not direct proof of PGSA-linked flows, it indicates that capital will find ways to monetise an informational advantage of this scale, inside or outside Western settlement systems.”
Great insight.
We ain’t in Kansas any more, Toto.
Thank you! 🙏
I had a look at the pgsa website. It is either peak iranian troll or a negotiation throwaway
Also, the domain was registered... in April of 1994
Great article and thank you for citing Hegemoney!
Thank you!
Guess we'll find out by July who has their theory reflected in reality ("operational minimum").
That May 5th intelligence report shows that "Wall of Steel" naval blockade sure seems full of holes, no AIS will still mean they likely paid off IRGC (and the payment flows would confirm that).
We might see repricing in the European space at least with divergence widening. Someone's going to come out positioned worse once this works itself out - my bet is on many European countries, maybe France and Spain can circumvent due to their own exploration, maybe Italy (but didn't sound like they can).
Just thinking out loud.
If Hormuz is to become an official instead of unofficial toll booth, as is my guess and would be logical to ask for in the MoU, there's not going to be cheaper oil & gas from there by sea anyway after an MoU outside of less demand and same production levels. Then there's still the matter of "will Iran cease nuclear programs" in a satisfactory way - we need to remember that is the official reason the US went there in the first place.
Drilling elsewhere will surely become more attractive. The premium on supply that doesn't cross a toll booth is about to get priced in.
https://youragnetwork.com/hot-barn-report-5-8-2026 here’s the correct link. Monty is a fun 2-3 minute listen each day
Enjoy this little price discovery “the hot barn report “. A nice break from energy!
http://hotbarnreport.com
Haha, that makes me hungry!