Oil Supply Adapts to Hormuz Disruptions
Speakers
Mike McGlone
— Senior Commodity Strategist, Bloomberg Intelligence
Summary
Bloomberg Intelligence's Mike McGlone discusses how oil markets are dismissing Strait of Hormuz closure threats, focusing instead on expanding Western Hemisphere supply and softening demand. He calls for crude oil to drop below $50, possibly $40 by year-end, and warns that elevated crack spreads are poised to roll over as they did in 2022.
- Markets are siding with US assurances that the Strait of Hormuz remains open, limiting the impact of Iran's threats.
- Global oil supply is shifting to the Western Hemisphere with rising output from the US, Canada and Argentina, making OPEC increasingly redundant.
- The US is now a net exporter and total Western Hemisphere liquids surplus could reach 8 million barrels per day next year.
- US gasoline demand is declining, yet crack spreads (refined products vs crude) have surged to near all-time highs.
- McGlone expects crude oil to fall to $50-$40 by year-end, driven by oversupply, demand weakness and political pressure for lower energy prices.
- The extreme crack spread resembles the 2022 peak that preceded a sharp reversal; he expects crack spreads to narrow.
- China has built large strategic crude reserves, buying on dips and selling on spikes, and its rapid EV adoption adds another demand headwind.
Ideas
Crude oil heading to $40-$50
Crude oil prices will trend lower, likely breaking below $50 and possibly $40 by year-end. The shift of global supply to the Western Hemisphere (US, Canada, Argentina) is accelerating, with the US becoming a major net exporter and approach a surplus of 8 million barrels/day next year. OPEC is becoming more redundant. High prices cure high prices: elevated crude accelerates more supply, while US gasoline demand is already declining. Midterm election dynamics also point to lower energy prices as the largest energy producer needs cheaper fuel.
Crack spread unsustainably high, rollover ahead
The crack spread (refined products vs crude) has reached extreme highs, similar to the 2022 peak that preceded a sharp rollover in crude and product prices. With US gasoline demand declining and the historical pattern of extreme spreads reversing, crack spreads are poised to narrow significantly.
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This Bloomberg Markets video, published July 12, 2026, features Mike McGlone discussing WTI, Crack spread. 2 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Mike McGlone · Tickers: WTI, Crack spread