Martijn Rats

The market is too optimistic about a quick recovery of Middle East oil supply through the Strait of Hormuz. Actual restart faces multiple constraints: ships need to be willing to sail, tanker fleet is misplaced, storage limits, and oil fields need restarting with 10,000 wells offline, 4-5,000 facing restart constraints. Only 75% of lost supply may return within ~4 months after flows resume, with final 25% taking into 2027. Buffers are thinning: strategic reserve releases dropping, US gasoline/diesel inventories low, China crude buying likely to return. Brent forecast $110 for Q2, $100 Q3, $95 Q4, $85 Q1 2027, eventually $80.

US gasoline inventories have declined significantly due to low imports from Europe, high exports from the Gulf Coast to Asia/Brazil/Mexico, and refineries maximizing diesel output over gasoline. With summer driving season approaching, the national average could rise from $4.50 to $4.70-$4.80 and potentially above $5, historically a point of demand destruction.