Trump Warns Against Rising Oil Prices Following Iran Attack

Oil Market Dynamics - Chinese traders are considered the most influential oil traders, primarily due to their significant purchases of Iranian crude oil [1] - Approximately 80% of Iranian oil is re-flagged through Malaysia before being exported, mainly to China [1] - The White House has seemingly turned a blind eye to sanctions, allowing Iranian oil to continue flowing at high levels [2] - There are concerted efforts to avoid interrupting the oil supply, with no party, including Iran, wanting to halt the flow [2] - Concerns about Iran closing the Straits of Hormuz are less about physical barriers and more about the potential for missile attacks on tankers [3] Supply and Demand - Current oil demand is extraordinarily high at 103 million barrels per day, equivalent to approximately 1300 barrels per second [5] - Global oil production capacity stands at 108 million barrels per day, indicating a spare capacity of 5 million barrels per day [5] - Spare capacity is primarily located in the Gulf region [6] - Strong demand, particularly due to Middle Eastern heat, has supported oil prices, with an extra 400,000 barrels per day of demand [9] - A cold winter in key markets (Northeast Asia, Europe, and the US) added over 1 million barrels per day of extra demand in Q1 [9] Geopolitical Risks and Market Sentiment - The market perceives a low risk of interruption in the Straits of Hormuz, as major players like China, the US, Europe, and Saudi Arabia want the oil to keep flowing [6] - The likelihood of the Straits of Hormuz being shut by the end of June is considered extremely low [7] - The market is in a plentiful supply situation, potentially pushing commodity prices lower even after accounting for risk premiums [8] - Incremental geopolitical disasters are needed to significantly increase oil prices [10]