Where To From Here?

short and to the point, unlike everything else

First the current state of play:

1. No vessels are exiting the Strait (yet): Clearly despite all the talk nobody with $50mm+ of metal to move and another $100mm+ of oil wants to risk it for now. Until that happens then oil markets remain tight and physical premia are still rising versus futures though front months have sold off heavily.

2. Trump remains untrustworthy: To say the current US government is a low trust counterparty is a major understatement. After assassinating numerous Iranian leaders VP Vance’s decision to go to Pakistan is somewhere on the Gavrilo Prinzip to Kenny from Southpark level of bravery.

3. No sign of troop drawdown in the Middle East: There is no sign of reduced deployments indicating a firm deal.

4. The current cope online from Trump adjacent people is that this oil is not their problem because the US produces a lot of oil. There are two rebuttals I have here:

   1. Firstly, that is flat wrong and there is a great paper on this here.

   2. Secondly, if you think anyone in Asia or Europe has a deep ideological problem with bribing a stationary bandit and this represents a shocking change to international norms and so forth see this map of where Roman coins are found:

      

5. US efforts to reduce decarbonization are going to utterly fail and demand for US LNG will get hit hard in the longer term. I discussed this at length on the latest episode of the Polycrisis podcast.

6. Everyone in Israel is very mad and their friends are having borderline meltdowns on Fox. The Gulf states are similarly displeased but it is not clear what they can do about it, if anything.

It is entirely possible the conflict resumes this weekend given attacks have not stopped either from Israel or Iran and that Trump has a track record for changing his mind and screwing people. Similarly, it is entirely possible Trump just cuts and runs leaving a mess albeit one that is oddly climate friendly as people witness the horror of how new weapons make fossil fuel supply chains deeply insecure.

Markets wise crude curves remain steep - it seems that nobody entirely believes this will stick and the loss of capacity remains as well as the lack of flow through the Strait of Hormuz. No doubt another sleepless week in markets and materials.