Global oil market will be 'safer,' says NEC Director Kevin Hassett

Summary

White House National Economic Council Director Kevin Hassett explained why oil prices are likely to fall from around $69 per barrel. He argued that the reopening of the Strait of Hormuz will allow Saudi Arabia and the UAE to run pipelines closer to capacity, reversing a large global inventory drawdown and flooding the market with supply. He also predicted that Middle East risk premia will decline due to the negotiated peace deal, making global oil markets safer. On inflation, he cautioned that the Fed is unlikely to overreact to any temporary oil-driven lift in core prices.

• Hassett expects crude oil prices to decline from current levels near $69.
• The Strait of Hormuz reopening will let Saudi/UAE operate pipelines much closer to full capacity.
• A large global inventory drawdown will reverse as supply surges.
• The peace deal lowers Middle East risk premia and makes oil markets safer.
• He sees the current Fed as disciplined and unlikely to make a policy mistake by overreacting to a temporary oil shock.
• The interview was conducted on Squawk Box following the release of a memorandum of understanding and upcoming talks.