Oil Could Spike Again, Babin Says
Summary
- Market participants must distinguish between logistical shipping delays (which heal in 10-12 days) and physical supply shutdowns (which take weeks to restart).
- Current supply shutdowns include 2.5 million barrels in Iraq and 500,000 barrels in Kuwait, representing a massive historical disruption.
- While global buffers like the SPR, floating storage, and Chinese inventories exist, an opaque timeline for resolution will cause these levers to run out of runway, sparking market panic.
- Technical factors, specifically dealers covering short call options in crude, are poised to reaccelerate and could drive prices back toward the recent $120 per barrel spike.
Trade Ideas
Once we start talking about supply shutdowns in the Middle East and we're starting to see that happen in Iraq, 2.5 million barrels and 500,000 barrels in Kuwait, then you're talking about a much longer process to get those barrels back online. If up to 20 percent of global oil supply remains locked up due to Middle Eastern shutdowns, global crude prices will remain structurally elevated. US-based and globally diversified energy producers will capture massive margin expansion from $120/bbl oil without bearing the localized production risks of the Middle East. LONG large-cap Western energy equities to benefit from sustained high oil prices driven by Middle East supply destruction. Aggressive and sustained SPR releases could artificially suppress global oil prices, or a global macroeconomic recession could destroy oil demand.
There's been a tremendous amount of call options trading in Brent crude. Dealers came in short and needed to cover, but that's going to reaccelerate... and we get those spikes again. Physical supply shutdowns in the Middle East take weeks to resolve. While strategic reserves (SPR) offer a temporary buffer, an open-ended timeline will exhaust market confidence. Combined with a gamma squeeze from dealers forced to cover short call options, crude oil is structurally set up for violent upside price spikes. LONG USO to capture the upside volatility and technical short-covering in the crude oil market. A sudden diplomatic resolution or immediate restart of Middle Eastern production would eliminate the geopolitical risk premium and collapse the trade.
Up Next
This Bloomberg Markets video, published March 09, 2026, features Rebecca Babin discussing XLE, XOM, CVX, USO. 2 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Rebecca Babin · Tickers: XLE, XOM, CVX, USO