The paper-versus-physical gap is where this gets interesting. Futures market is pricing a policy assumption. Everyone calibrates to the short conflict and the physical cost compounds in the background while the world waits for August. That's the part that worries me.
And 6% inflation? Yikes. Just read that UAE is leaving OPEC too, so self-interest filling the vacuum while uncertainty sits on the table feels like exactly the dynamic you're describing. Thanks for writing this, Janu.
Interestingly, the futures price has now become more aligned with spot now, so perhaps reality is setting in for markets. Not much reaction to the UAE leaving OPEC though, and I don't think that's surprising. It doesn't really matter when the Strait is still shut. Plus non-OPEC oil production has been increasing already, which means that the ability of OPEC and OPEC+ to control output was diminishing. I guess the only big implication is what does that mean for OPEC now after the war? Does that hold together?
The paper-versus-physical gap is where this gets interesting. Futures market is pricing a policy assumption. Everyone calibrates to the short conflict and the physical cost compounds in the background while the world waits for August. That's the part that worries me.
And 6% inflation? Yikes. Just read that UAE is leaving OPEC too, so self-interest filling the vacuum while uncertainty sits on the table feels like exactly the dynamic you're describing. Thanks for writing this, Janu.
Interestingly, the futures price has now become more aligned with spot now, so perhaps reality is setting in for markets. Not much reaction to the UAE leaving OPEC though, and I don't think that's surprising. It doesn't really matter when the Strait is still shut. Plus non-OPEC oil production has been increasing already, which means that the ability of OPEC and OPEC+ to control output was diminishing. I guess the only big implication is what does that mean for OPEC now after the war? Does that hold together?