Delegate told Reuters’ Russell, adding that it was more likely for regime change to take place in the United States than in Iran, which appears to be a widely shared view among the event’s delegates. However, it would be difficult to argue that a Democrat win at the November midterms would translate into any form of regime change. This, in turn, means the war will likely extend into next year and possibly last until Trump’s term in office ends.
The implications of such a scenario are rather unpleasant, economically speaking. Brent is back above $100 per barrel, and this is just the futures price, not the price for physical deliveries. Those often cost a lot more, Russell and other commentators have repeatedly pointed out. Bloomberg just this week reported that Russia’s ESPO blend has surged to a premium of some $20 per barrel to Brent crude as Chinese independent refiners run out of alternative options, with the U.S. naval blockade on Iranian ports and the grab for Venezuelan crude cutting off two main supply channels.
Traders appear to have started paying more attention to physical prices than the futures market chart, Russell also noted in his report. This is a positive development because the fixation on futures prices missed a lot of what was happening in the physical market, which was mostly higher prices due to surging insurance and freight rates.
crude oil is a lot more difficult in fuels. The fuel crunch is getting increasingly severe, and a prolonged war for the Strait of Hormuz will make matters quite a lot worse, as stated by industry executives at APPEC earlier this week. “We’re still not running enough refining capacity to prevent those draws, and we keep eating into the surplus that exists around the world,” Vitol’s Russell Hardy said at the industry conference.
Refineries have been running at higher than normal rates to make up for lost production from the Middle East and Russia, but this has not been enough because, as noted by Vitol’s chief executive, there is not enough capacity to make up for all the production lost.
When the U.S. and Israel launched those first strikes on Iran, the general mood was that the war won’t last more than a week—perhaps a month. Then the timeline got moving, as it became clear that it was not going to be as easy to subdue Iran as expected, and as Iran shocked everyone by finally following through on its threat to close the Strait of Hormuz. Peace is not an immediate option, it seems. Brent and WTI are both over $100 per barrel. And there is no end-of-the-week Truth Social post by President Trump about the resumption of negotiations. This is, to put it mildly, not a good sign.
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