RySci 🛢

It's important to mentally separate eastbound (i.e., exiting) Hormuz ship crossings from the restart of shut-in Middle Eastern production. There's ~175 million barrels of petroleum on tankers floating, tapped in the Middle East Gulf (MEG). That's effectively a quasi-strategic stock at this stage. A pickup in Hormuz crossings is basically like a little SPR release, drawing down that stock and making it accessible to the market. But while a helpful relief, that crossing by itself doesn't change the ~13-15 MMbpd (higher number now includes Iran) of shut-in MEG production, the cumulative loss of which now stands at >700 million barrels. Only thing that'd do that is getting new, empty tankers into the MEG (i.e., westbound entries), the loading of which will draw down bulging onshore stocks, relieve egress bottleneck, and begin to facilitate restarts.

Why are oil prices not higher ? Via Morgan Stanley's Martijn Rats & team 1) market had significant buffers before the start of the war 2) market expects the Strait to re-open soon 3) seaborne oil exports from the US have surged unexpectedly 4) China has (also unexpectedly) cut its imports of seaborne oil , down 5.5mbd in the last month- drawing down on inventories instead => The rise in seaborne exports from the US and decline in imports into China has absorbed 9.3 mb/d of the 12.3 mb/d YoY Middle East decline, shielding the rest of the world But: analysts warn a 'sustained closure could cause renewed tightness'. Bull Case $130-150

yes, I see it quoted a lot and it is true, but infering that paper dominates physical from that is wrong, IMO: volume is large, but risk transfer is low. Try trading 20-30mb in the futures market and you will move it a lot. What is indicative of risk transfer capacity is not the volume, but absolute levels and changes in the positioning across major categories - Money Managers and/or Other. Those are at few hundred mb (say 575mb for net Brent&WTI futures and options - for MM+OR) - and still less than half of the peaks few years ago. A change of 100mb in a week would be a very big change and would most likely coincide with a big price move. This is 20mb a day - for context.