Oil should be WAY more expensive right now, and it kinda makes you wonder why it isn't
The U.S.-Iran conflict has knocked a huge chunk out of Middle East oil flows, with shipments falling from around 18 million barrels a day before the war to roughly 11 million now.
The Strait of Hormuz, one of the world’s most important oil chokepoints, has all but ground to a halt since fighting flared again in late August.
So why hasn’t crude exploded? Because the market keeps finding ways around it.
Saudi Arabia is rerouting exports through alternative ports. Iraq and Egypt have pushed more barrels through their own routes. The U.S., Canada and Guyana are pumping more.
And China, normally the world’s biggest oil buyer, has been buying less, taking some of the pressure off.
But the headline price hides how tight things are underneath.
Traders are paying a premium for barrels they can actually get their hands on now. A sign physical supply is considerably tighter than the futures price suggests.
Morgan Stanley sees oil averaging $100 a barrel by year-end. Goldman Sachs just raised its December forecast to $85.
For now, the global oil system is improvising fast enough to keep prices contained. How long it can keep doing that is the real issue.
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