Oil war: losses and profits

XTI/USD

Key zone: 91.00 - 95.00

Buy: 96.50 (after retesting 95.00); target 101.00-103.50; StopLoss 95.50

Sell: 90.00 (on strong negative fundamentals); target 86.50-85.50; StopLoss 91.00

Trump enthusiastically promotes the blockade of the Strait of Hormuz as an outcome of the war and a strategic advantage for U.S. oil and gas exporters. However, the attempt to strip Iran of control over a key route has already resulted in the market losing more than 2 million barrels of oil per day, previously directed mainly to China.

Recall:

According to the latest OPEC report, in March oil production by cartel countries dropped by a record 7.88 million barrels per day — the largest decline since records began in the 1980s. The main impact fell on Iraq, Saudi Arabia, the UAE, Kuwait, and Qatar.

Against this backdrop, OPEC lowered its global oil demand forecast for the second quarter by 500 thousand barrels per day, while the annual forecast remained unchanged.

The reduction in supply predictably increases price pressure across the entire chain — from basic automotive fuel to industrial raw materials. More than 20% of global oil and LNG supplies are already unavailable, forcing key Asian consumers, including Japan and South Korea, to urgently seek alternative sources.

The most obvious option is supplies from the United States. According to Kpler estimates, about 70 VLCC supertankers are expected to arrive at Gulf of Mexico ports in April–May, each capable of carrying up to 2 million barrels. Oil exports could reach 5–7 million barrels per day by the end of April.

At the same time, the U.S. continues to import about 6.2 million barrels of oil per day, mainly from Canada and Mexico, to supply refineries configured for heavy crude grades.

However, the ability to ramp up domestic production to the levels Trump envisions raises serious doubts.

• current production stands at around 13 million barrels per day, with a significant portion already contracted;
• export infrastructure in Texas and Louisiana is operating near capacity, with limited резерв capacity;
• Enbridge is expanding the Ingleside terminal capacity by 2.5 million barrels, but logistics issues remain;
• the $625 million modernization of the Port of Corpus Christi has not significantly increased throughput;
• the Golden Pass project (Exxon Mobil and QatarEnergy) could add about 18 million tons of LNG per year in the future;
• Cheniere Energy is considering postponing maintenance to increase supply.

At the same time, a number of major projects, including initiatives by Phillips 66 and Enterprise Products Partners, have faced regulatory and market constraints — investors did not expect such aggressive foreign policy activity from Trump.

Domestic pressure in the U.S. is also increasing: fuel prices continue to rise. The average price of regular gasoline has reached $4.13 per gallon — $1.15 higher than at the start of the conflict. Following the blockade announcement, U.S. oil rose by 2.6% to $99.08 per barrel.

Export growth is not accompanied by increased production. Moreover, U.S. shale companies are not rushing to expand drilling, questioning the sustainability of current prices. This implies a gradual depletion of inventories and increased pressure on prices in both wholesale and retail segments.

The market is trying to identify the level at which the “demand destruction” effect will begin. A prolonged period of high energy prices increases the risk of recession, which in itself will limit consumption. Already now, according to the IEA, gasoline demand in the U.S. has decreased by about 100 thousand barrels per day (-1.4%) over the past week.

In the short term, U.S. exporters and oil traders benefit, profiting from high prices and infrastructure utilization. However, for consumers, rising fuel costs are a negative factor, and for Trump — a significant political risk amid the upcoming “battle” for parliamentary loyalty.

Trump’s current strategy is accompanied by systemic costs for the economy and the domestic market. Rising prices, infrastructure constraints, and a weak production response are creating an imbalance that the market will correct on its own.

Unfortunately, the idea of Donnie’s “victory” will soon require serious revision — market laws do not obey presidents.

So we act wisely and avoid unnecessary risks.

Profits to y’all!