Analysis of Oil Market and Iran's Influence

In your mind, like, what is it that's, that you have not seen

more attacks from Tehran yet?

I

only suspect this-

Yep

...

that the countries that are... By the way, this is

just my speculation. I'm just gonna put it out there.

I-

We appreciate it. This, this is not official. This

is not an official line.

This is a Michelle line.

This is not an official line. This is...

And people that know me know that I'm a radical when it comes to- ...

ideas.

I

suspect

that the countries that are able to get their crude

out are paying Iran.

Okay. Yep.

And I suspect there is a toll that's being paid which

is giving these ships safe passage.

I also suspect that

these countries know that it is, this is

unsustainable

from a perspective of a US es- escorting, and

also unsustainable from them paying Iran 10%

of their cargo or 20% of their cargo.

So that is unsustainable. It is unsustainable to continue

to pay a hefty fee to Iran and for the US government

to be escorting these ships through,

um, and for this to carry on because it's

expensive

for the US government, it's expensive for the US taxpayer,

it's expensive for these countries that are trying to get their,

get their ships

out. So you're starting to see, like, what I would call, like, a race

to get out as much as possible, as quickly as possible before the

war restarts.

And we've seen Tr- There was a Time article, Times article this

morning that came out saying that Trump is talking about

re-escalating the war again.

Yeah.

And so why not get as many ships as you can out of the

strait as quickly as possible? But this is not, in my

mind or

i- in my view, a sustainable way to

keep oil flowing through the strait, and there needs to be something that's

more

sustainable that restores confidence in the strait.

Completely agree. And I think that this also, I think,

goes a little bit to the

question of, like, why have crude oil prices held up so well

despite this very large rise in flows out of Hormuz?

Because the last time we saw flows anywhere near this high and, you know,

post-MOU in that June, July kind of breakout period,

we saw not just prices collapse, but term structure flip very quickly into

contango. Like, there was very clearly...

It was, uh, the market loosened almost immediately in

the span of, like, a week and

a half. Now, we still have prices above 100.

We still have, you know, four or five dollar backwardation along kind of

prompt curves. Um, the market still feels tight despite these

volumes. So I think to a degree, I mean, if, if participants are talking or

worrying about a resumption of hostilities, it's kind of the

opposite scenario as what we had in June and July, which is like, "This is actually

the end, and here's a glut of crude kind of coming

on the ocean."

Now it's like, "Here might be your last chance to buy

barrels before we know, we,

we, we temporarily close up shop again." Um-

Mm-hmm

... is that kind of i- Does that make sense to you?

Yeah. Yeah, that's kind of how I see it as well.

It is, this is not sustainable.

This could go away tomorrow if the US

moves back into striking Iran again.

And y- these countries, one, want to get their ships out as quickly as

possible,

and two, if you're a buyer of crude and you n- you're,

you need to start refilling

your inventories, such as China, then you are just gonna take as many

barrels as

you possibly can through the strait.

And so, and also inventories, inventories are still

relatively low, right? Like-

Yeah

... it's not like we have a cushion of

inventories to draw down.

So I, I expect it, prices should be able to remain relatively

elevated

until, again, we need to see confidence restored in the

strait.

Yeah. I mean, like, we went into this war with arguably the

best-stocked position we could humanly have to go into a war in

which the Strait of Hormuz was closed.

We had a more than a year of sustained surplus.

We had everyone stocking up to the hilt. Um, we had high oil and water.

We had everything. And then now we've basically drawn all of

those down. There's still stuff in, in the tanks, like, it's not like SPRs are

empty, but, like, the, the feeling of, like, having a

very stiff shield, I think, has, has, has begun, has begun to wane a little bit.