We don't expect the Strait of Hormuz to reopen until next year, says Kpler's Matt Smith
Speakers
Matt Smith
— Lead Oil Analyst, Kpler
Summary
Matt Smith of Kpler argues that the Strait of Hormuz closure will extend into next year, keeping crude oil supply constrained and pushing prices higher, while gasoline and diesel product markets face worsening strains and elevated prices.
- Strait of Hormuz closure expected to last into next year, halting ~15 million barrels/day of crude flows.
- Houthi attacks on Bab el Mandeb threaten the Saudi Red Sea release valve, compounding supply risks.
- Crude oil prices have further to rise, with WTI around $90 and Brent up 40% in weeks.
- Gasoline ($140/bbl) and diesel ($180/bbl) markets remain under extreme strain and conditions will worsen.
- Jet fuel tightness previously resolved but at the cost of gasoline and diesel availability.
- Pump price pullbacks gave US administration room to escalate, not a sustainable relief.
Ideas
Supply disruption pushes crude higher.
The Strait of Hormuz closure, halting about 15 million barrels per day of crude, is expected to persist into next year, compounded by Houthi attacks on the Bab el Mandeb exit that remove a critical Saudi release valve; these supply disruptions will force crude prices higher.
Product tightness worsening, bullish gasoline/diesel.
Refined product markets for gasoline and diesel remain severely strained after jet fuel demand was addressed, and the tightness will only worsen, pushing already elevated prices ($140/bbl gasoline, $180/bbl diesel) even higher.
