Latest Thoughts On The Oil And Natural Gas Market Amidst The Prolonged Iran Conflict
We are now 21 days into this conflict, and here are some facts you should know:
The oil-on-water buffer is now depleted. Every day that goes by now, crude-on-water will drop ~11 million b/d. This figure will flow into onshore storage.
Onshore crude oil inventories, excluding China, have a buffer of ~45 million bbls. This buffer will be gone in 4 days.
SPR release will start late next week, but the flow mismatch (2.5 million b/d vs 11 million b/d) will result in onshore storage to decline by ~290 million bbls in April.
Total production shut-in is now ~10 million b/d. Iraq’s 4.3 million b/d is near zero, with Kuwait to follow. The UAE and Saudi Arabia will be able to maintain production for another week before further reducing it. By our estimate, the middle of next week will see production shut-in reach ~12 million b/d.
Many of the experts I speak to on this matter believe that the conflict will not be resolved in April. If that is true, the oil market will break by early April, and we will see demand destruction levels as soon as the 2nd week of April.
Note: Some regions are already seeing demand destruction.
We will dive deeper into the details below.