Oil in search of an alternative

XBR/USD

Key zone: 91.00 - 95.00

Buy: 96.50 (on a pullback following a retest of 95); target 98.50-100; StopLoss 95.80

Sell: 90.00 (on strong negative fundamentals); target 87.50-86.50; StopLoss 90.70

To destabilize shipping in the Bab el-Mandeb Strait area, it would be enough for the Houthis to carry out several attacks on oil tankers off the coast of Yemen. Even a limited number of incidents could trigger a sharp decline in traffic through this strategically important route, as shipping companies and insurers would factor in the risk of further attacks.

Reminder:

Iran closed the Strait of Hormuz more than three months ago, and since then only three factors have prevented oil prices from reaching new record highs: China's enormous reserves (more than 1.2 billion barrels), the large volume of oil already loaded onto tankers, and Saudi Arabia's capacity to maintain exports bypassing Hormuz.

Traffic through Bab el-Mandeb had already been restricted since 2023. At that time, most commercial vessels preferred the alternative route around the Cape of Good Hope, which extends the journey from Asia to Europe by 1.5–2 weeks. By 2025, the intensity of the conflicts had decreased, but traffic never returned to pre-crisis levels.

• The consequences could extend far beyond the immediate reduction in supplies. A decline in the volume of oil available on the spot market will inevitably lead to higher transportation costs. Market participants will be forced to use longer delivery routes, increasing both freight rates and fuel consumption by the global shipping fleet.
• Logistics remain an additional constraint. Fully loaded VLCC-class supertankers are unable to pass through the Suez Canal, reducing the flexibility of global supplies and further undermining the efficiency of the international oil market.
• Such a development could elevate both the military conflict and oil prices to an entirely new level. For market participants, this would mean not merely another spike in geopolitical tensions, but a direct deterioration in energy supply conditions.
• The alternative option used by China is unavailable to most consumers. In May, China sharply reduced oil purchases on foreign markets: import volumes fell to their lowest level in more than eight years.
• Such a scenario would inevitably reduce oil availability on the spot market. Buyers would find it more difficult to secure the required volumes of crude promptly, while suppliers would struggle to guarantee stable deliveries. Transportation costs would rise simultaneously. Longer routes would increase fleet turnaround times, raise fuel consumption, and push freight rates higher.
• An additional problem is the limited flexibility of the global logistics system. VLCC-class supertankers, which play a critical role in transporting large oil cargoes, cannot pass through the Suez Canal when fully loaded. This means that if conditions deteriorate, part of the supplies would be forced to use less efficient and more expensive routes, placing additional strain on global transportation infrastructure.
• As a result, the market would face not only the risk of reduced physical supply volumes but also a decline in the overall efficiency of global oil trade. Rising logistics costs, longer routes, and higher insurance expenses could influence prices as much as a direct reduction in global oil supply.

Incidentally, the alternative approach being used by China is unavailable to most consumers. In May, China sharply reduced oil purchases on external markets: import volumes fell to their lowest level in more than eight years. Beijing is deliberately refraining from aggressive buying and is adapting to the loss of most Persian Gulf supplies through three instruments: export restrictions, lower refinery utilization rates, and the use of accumulated reserves. China is unlikely to increase imports for several more months and will most likely emerge from the current crisis as the strongest player.

And what is the result?

Under such a double-blockade scenario, the global market could face the additional loss of several million barrels per day of heavy Middle Eastern crude oil. This would create a new wave of tension in the energy market and intensify pressure on oil prices.

Developing new routes requires not only substantial investment, but also time and international agreements, particularly when pipelines pass through multiple countries. Price dynamics in the major oil benchmarks remain unstable and highly vulnerable to speculative risks.

So we act wisely and avoid unnecessary risks.

Profits to y’all!