Asks for oil price prediction given peace talks failing and where oil opens tonight.
Speaker1
Amrita Sen
Oil will open sharply higher, already up 6% in IG trading. Market is in denial about ramifications of supply disruption.
10 million barrels per day shut in since February, rising to 13 million this month. Physical crude is $30-40 higher than futures, which has never happened before.
Asks if we're in denial about the ramifications.
Speaker1
Amrita Sen
Absolutely. This is the biggest energy shortfall in history. Attacks on Saudi Arabia reduce spare capacity. All buffers are gone.
Drawn down all floating oil from Russia and Iran. Attacks show Aramco's strength but reduce available spare capacity.
Even with a deal, restarting flows isn't a switch. Asks about functional vs nominal opening and impact on insurance/crew costs.
20,000 sailors stuck in Gulf, need bravery to return, deal could fall apart again.
Speaker3
Amrita Sen
Hit the nail on the head - situation isn't binary. Cost to get a ship in was $40/barrel vs $6 outside strait. Gradual process even with ceasefire.
Mines rumors make commercial shippers anxious. Production takes months to restart. Satellite data shows only 5-6 days inventory cover. Normalization is months away in best case.
Asks about John Bolton's suggestion of US blockade and military force to open strait.
Speaker1
Amrita Sen
Most complicated picture. Strait closure gives Iran biggest leverage in 40 years. Deal won't resolve in two weeks. Iran more likely to give on nuclear issues than strait.
US allowing Iranian oil flow and giving waivers shows conflict - US doesn't want high oil prices but this is global market. That's why we have price discrepancy.
Asks about possibility of Iran enacting a toll on strait transit.
Fear that US will claim victory with nominal deal but leave strait functionally worse, allowing Iran to charge toll.
Speaker3
Amrita Sen
Worst case scenario. GCC won't agree. Would mean much higher oil prices as steady state for 3-5 years. Floor of $80-90 or $90-100 as new cost basis.
Physical price at $150 vs futures at $100. Alternative routes/pipelines take 5-10 years. Iran may not want to fight all GCC exporters.
Asks if $82 futures curve for December accurately reflects expected prices.
Speaker3
Amrita Sen
No. Futures trade 1.5-2 months out, everyone reflects current prompt. As contracts become prompt, they roll up. Prices need to be higher than $82 going forward.
General narrative is US won't allow high oil prices before midterms, but reality different. Only massive recession would balance at $82.