“.... the scenario for higher oil should also be imagined.
While the supply from the U.S. and Venezuela is growing, the Middle East is a powder keg. Tensions with Iran reached multi-month highs last week — but today, Trump signaled that Tehran is “seriously talking,” and WTI gave back 4.7%. The market is pricing out the geopolitical premium. That is precisely what makes the short trade look attractive right now — and precisely what makes it dangerous if talks collapse. Iran produces roughly 3.3 to 4.2 million bpd. If the U.S. moves from trade wars with India to a kinetic conflict with Iran, or if the Strait of Hormuz (where 20% of global oil flows) is even slightly disrupted, the ~1.2 million bpd India is shifting away from Russia may seem like a drop in the bucket. In a “Strait of Hormuz Closure” scenario, oil price could surge to triple digits, regardless of what India buys.”
That has come home to roost now!
