RBC’s Helima Croft: Iran has significant disruptive capabilities; unclear how sanctions will help

Summary

Helima Croft discusses how Iran sanctions and Strait of Hormuz disruptions are keeping oil prices elevated despite 'open for business' rhetoric. She highlights diesel as the key tight product market because refineries are running flat out and being targeted. She also flags China's reduced crude imports as a key support; if China resumes large buying, oil prices could rise. Her baseline for Brent is the mid-$90s, with no breakout to 2022 levels.

• Iran sanctions may not change behavior; Iran retains missile and drone capabilities against ships and regional infrastructure.
• Oil prices remain elevated because Iranian escalation risk is still clear despite administration rhetoric.
• Diesel prices are at historic highs with no spare refining capacity, while Middle East and Russian refineries are being hit.
• China's sharp reduction in crude imports is a key economic support for global oil markets.
• A Chinese return to large-scale crude buying could send oil prices higher.
• RBC's Brent baseline is mid-$90s on about 8 million barrels per day lost from the war, but no 2022-style breakout is expected.
• Winter gasoline blend changes are only marginal relief while refinery outages persist.