George City FTW

Given the magnitude of Middle Eastern production losses (13MM Bbl/d) and the inability of meaningful short-term supply adds elsewhere, it is inevitable that demand will have to fall as inventories continue to be sharply drawn down. The challenge though is the magnitude. Even with 3MM Bbl/d of SPR release and modest run cuts to date, we likely need to reduce demand by the same amount as during COVID, the biggest demand shock in history (in bbl/d terms). This is either achieved by government actions like rationing (happening) or price. Likely both. Physical barrels are already trading over $130-$140 and likely heading higher, while the paper oil market will at some point have to reflect the physical reality. Even with a full opening of the Strait of Hormuz today, given voyage lag time a coming price spike seems inevitable, presidential jawboning or not. With each passing day, the floor price is rising, well above what energy stocks are currently discounting.

Last month was the hottest March on record for the Lower 48… and suddenly it’s framed as evidence of a planet spiraling out of control. But here’s what they won’t tell you… An upcoming El Niño isn’t “heating the Earth.” It’s a natural ocean cycle that redistributes heat already in the system… shifting warm water across the Pacific and temporarily boosting atmospheric temperatures. That’s not new energy. That’s not a forcing. That’s physics. We’ve seen this movie before… 1998, 2016, 2023. Big El Niño years spike temperatures… then things settle back down. Weather patterns like high-pressure ridging, ocean cycles like ENSO, and natural variability still dominate short-term extremes… not a trace gas making up 0.04% of the atmosphere. So when you hear “hottest ever” tied to an El Niño forecast, remember… You’re not watching the planet suddenly overheat. You’re watching a natural system move heat around… exactly like it always has.