In this report: I look at the most high impact seasonal trades across crude markets as we stare into a DEFCON 1 situation for crude markets. About 75% of this report is below the paywall as I go deep into the trade sups this week and there is a lot of context and data to cover.
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Last week. Brent -0.71% (-$0.74) Open $107.11 H $109.80 L $101.53 C $103.87
Iran’s Parliament Speaker Mohammad Bagher Ghalibaf has reiterated Tehran’s stance on the Strait of Hormuz saying the critical waterway will remain closed until the United States fulfils its signed commitments.- Al Jazeera news
Articles
EIA Weekly inventory report- The Oil Report
Flames, smoke seen near Riyadh airport; Houthis claim attacks on Saudi capital
Mark Carney Speech to EU
Some Gas Stations ‘Out of Diesel’ as Prices Surge
Yanbu pipeline attack ripples across crude, freight and gas markets
China presses Iran to help rein in Houthis after Saudi appeal, sources say
Russian refining sector struggles amid intensifying Ukrainian attacks
Hormuz shuttle tankers: An evolving trend amid the Iran War
From Yanbu to Sohar: Tracking Saudi Arabia’s alternative oil routes
VLCC rates reach uncharted territory
Super El Nino may blow Europe’s gas demand forecasts off course
Germany’s Merz promises relief plan ‘soon’ as pump prices hit record
Norway’s Johan Sverdrup rises over $7/b to an all-time high of $19.55/b
Goldman: China Is Buying Twice as Much Gold as It Reports
Why are central banks moving their gold reserves
![[Al Jazeera]](https://substackcdn.com/image/fetch/$s_!c_Z_!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fb4b4c288-f755-431e-9ef8-0a12e97ebf4e_770x962.jpeg "[Al Jazeera]")
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Global energy markets have been rocked in the past 10 days. Houthi attacks on the Saudi Petroline, Sept 10th, have effectively knocked another 5% (5mbd) off already shaken global crude supplies. With levels of Hormuz oil transits rising in earnest, markets were underpriced for this risk, seeing global benchmarks such as Brent rise+$8. With a touted 6 weeks fix timeline to regain 50% of pipe flows, markets are already anticipating a resolution to the outage, with the Brent premium over WTI already pairing back rapidly. This ‘pricing out’ of the risk is translating into about a $4 pullback in Brent Wednesday through Friday pre-market trade.
There is significant doubt whether Petroline repairs can actually be delivered within a 6-week timeline, with experienced field operators from that part of the world speaking about a 3-month period as more realistic. Already workaround flows have resumed on the Petroline at a greatly reduced flow capacity. When fixed, The Saudis will have to vastly increase security. It remains to be seen if Trump will do anything about it, while The Saudi buys 48 more F-35 fighters (yet to get congressional approval). They are going to need them.
Hormuz & STS Transfers
Hormuz flows are modestly bouncing (currently 8mbd-9.5mbd Kpler & Tankertrackers), aided by STS and Shuttle transfers. ‘Shuttle vessels’ pickup oil at The Omani port of Sohar- East of Hormuz and another closer to Fujairah. This oil either transfers to a nearby ship and transfers the cargo to go for final leg delivery, or it makes a much longer journey to India or Malaysia to transfer ships there for final leg delivery.
You can see where day rates on ships here become a major cost factor. Some freight rates at the moment are adding as much as $20 to the cost of a single barrel of its cargo.
Inflation
Tell me there is inflation coming without telling me there is inflation coming! More in the net net below.
Refining end game
A week ago Trump asked Zelensky to stop hitting Russian energy targets. Zelensky responded by hitting 5 key Russian refiners, knocking out almost half a million barrels. In the last 3 months, we have lost about 3mb/d of refining.
The Net Net
A perfect energy led storm has set in over the skies. The inflation we have seen in the post COVID phase, came and went and from this vantage point, was finally ‘transitory’. Damaged and tighter energy flows now reverberate across commodity markets. Now the Houthi attacks and the reality of war are set to wake inflation again. The oil and dry bulk shipping rates are singing a canary song. A bout of 70s style inflation seems comically unavoidable.