Analyzing Risk of Disruptions to Strategic Chokepoints in the Middle East suggested crude oil pricing screened rich to historical analogs in the overnight session, TDS' Senior Commodity Strategist Daniel Ghali notes.
Strait of Hormuz still open, risk premium overstated
"Recall that zero barrels have been disrupted, hinting at a strategic decision to avoid damaging global energy supply. Current prices are consistent with our analysis of three quarter-centuries of geopolitical risk premiums in oil markets."
"For as long as Iranian energy exports are flowing freely, incentives to block the Strait of Hormuz are akin to a mutually assured economic destruction, inferring little incentive to do so."
"Even further, more barrels are flowing out of Iran as a result of Israeli strikes on domestic consumption, and US shale producers hedging at higher prices will likely lower the floor price for crude if the status-quo prevails. CTAs are max long, but will only meaningfully sell below $76.85/bbl."
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