Amos Hochstein

Physical shortages of oil and oil products are worsening and will spread from poor to middle-income to developed countries, creating a cliff by end of the month. Tankers are not moving, physical Brent barrels are trading far above paper prices ($115-$177 vs ~$110), and the divergence between paper and physical will likely resolve with physical prices moving higher. This will drive up the cost of crude oil, jet fuel, and diesel, making summer travel and driving very expensive.

The MOU with Iran lifts massive sanctions on Iranian oil, gas, petrochemicals, and refined products, freeing up frozen assets and enabling oil sales that could generate about $1 billion a week. Iranian crude will initially flow to China and India then broaden to other buyers. Oil prices (Brent $77, WTI $73) are still trading at a significant premium to the pre‑war December levels of $56‑60, and as this supply comes back prices will decline, potentially testing those December lows with an additional $5‑10 of downside.

Gasoline prices are disconnected from crude: with WTI around $81.85, gasoline should be lower, but it remains over $4. This shows the oil-gasoline correlation is out of whack and creates a relative value setup where gasoline is overpriced relative to crude unless a new supply or escalation shock hits.

Diesel and refined product supply is facing a severe crunch. Russia's diesel exports, which used to account for 11% of the global market, have been halted by an export ban after Ukrainian attacks on refineries. Two refineries went out just yesterday, US refineries are running at 96-97% without maintenance, and the Middle East, a major source of refined products, is also disrupted by the ongoing war. This sets up a sharp tightening and higher prices.

Countries like the UAE and Saudi Arabia are pursuing long‑term diversification away from oil and will double down on tech investments. Most of that money will flow to the United States because China has a ceiling on how much they can invest and Europe offers only small opportunities, so US tech will be the primary beneficiary.